To link to the entire object, paste this link in email, IM or documentTo embed the entire object, paste this HTML in websiteTo link to this page, paste this link in email, IM or documentTo embed this page, paste this HTML in website

Debra K. Davenport
Auditor General
Performance Audit
Department of
Agriculture—
Food Safety and Quality Assurance
Inspection Programs
Performance Audit Division
May • 2010
REPORT NO. 10-04
A REPORT
TO THE
ARIZONA LEGISLATURE
The is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Melanie M. Chesney, Director
Shan Hays, Manager and Contact Person
Jeremy Weber, Team Leader
Steven Meyeroff
Cheya Wilson
Representative Judy Burges, Chair Senator Thayer Verschoor, Vice Chair
Representative Tom Boone Senator John Huppenthal
Representative Cloves Campbell, Jr. Senator Richard Miranda
Representative Rich Crandall Senator Rebecca Rios
Representative Kyrsten Sinema Senator Bob Burns (ex efficio)
Representative Kirk Adams (ex efficio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
May 13, 2010
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Mr. Donald Butler, Director
Department of Agriculture
Transmitted herewith is a report of the Auditor General, a Performance Audit of the
Department of Agriculture—Food Safety and Quality Assurance Inspection Programs. This
report is in response to a November 3, 2009, resolution of the Joint Legislative Audit
Committee. The performance audit was conducted as part of the sunset review process
prescribed in Arizona Revised Statutes §41-2951 et seq. I am also transmitting within this
report a copy of the Report Highlights for this audit to provide a quick summary for your
convenience.
As outlined in its response, the Department of Agriculture agrees with most of the findings
and plans to implement all of the recommendations directed at it.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on May 14, 2010.
Sincerely,
Debbie Davenport
Auditor General
Attachment
costs, partly because licensing fees have
not increased for over 50 years except for
temporary increases in fiscal years 2009
and 2010.
The dairy industry in other states pays
more of the costs. In four of the ten states
surveyed, the industry pays the majority
of the inspection costs. In four of the
other six states surveyed, the industry
paid from 5 to 17 percent of the costs.
Arizona dairy industry fees have generally
contributed less than 1 percent of costs.
The Department regulates the safety of
milk and milk products by enforcing the
federal grade “A” pasteurized milk
ordinance, which the State has adopted.
This allows Arizona dairies to sell their
products in other states. The Department
inspects sanitation and other specific
processes and conditions at dairy farms
and processing plants, and tests samples
of milk and milk products.
The State General Fund pays for almost
all of the program’s $390,000 in annual
The USDA and the State each pay half of
the program’s costs, and transferring
meat and poultry inspection to the USDA
would save the State about $400,000 a
year. The State General Fund pays nearly
all of the State’s share of program costs
except a small amount from fees and
overtime inspection charges. If the
program is transferred, some
establishments may incur facility
modification costs, but it does not appear
that modifications should be extensive.
Industry costs for overtime inspections
could also increase because the federal
overtime rate is higher, but overtime use
appears to be limited.
As an alternative, the State could increase
fees so the industry covers the inspection
program’s costs. However, with only 34
state-inspected facilities, each could have
to pay an average of more than $10,000
per year to cover the inspection
program’s costs, which could place a
burden on the establishments.
The USDA has ultimate responsibility for
meat and poultry inspection. The USDA
must inspect any slaughter or meat
processing plant that sells meat and
poultry out of state. However, states may
enter into agreements with the USDA to
inspect establishments that do not sell in
interstate commerce.
Inspections, whether federal or state,
ensure that animals are disease-free,
facilities are clean and sanitary, and meat
and poultry products are wholesome and
properly labeled. In Arizona, 27
establishments are federally inspected,
and 34 are state inspected. However, the
federally inspected establishments
account for over 99 percent of all cattle
slaughtered in Arizona.
Many states do not have state inspection
programs—Twenty-three states, including
states that produce large amounts of red
meat like Colorado and Nebraska, do not
conduct state inspections. Only 4 of 13
western states, including Arizona, have
state inspection programs.
2010
May • Report No. 10–04
Department of
Agriculture—
Food Safety and Quality Assurance
Inspection Programs
Our Conclusion
The Department of
Agriculture (Department)
helps ensure the safety
and quality of Arizona’s
dairy products, meat and
poultry, eggs, and fresh
produce. Because the
dairy industry benefits from
the Department’s
oversight, the State should
share more costs—which
the State General Fund
bears almost entirely—with
the industry, as some other
states do. Similarly, the
Legislature should
consider transferring
responsibility for meat and
poultry inspections to the
U.S. Department of
Agriculture (USDA), who
would conduct these
inspections at no cost to
the State, or require the
industry to pay the costs of
operating a state program.
The Department should
also continue shifting its
produce program
emphasis from quality to
safety and take additional
actions to promote food
security.
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
Dairy industry should share in safety program
costs
Consider transferring meat and poultry
inspections to USDA
Better promotion of food defense
Promoting produce safety
Department of
Agriculture—
Food Safety and Quality Assurance
Inspection Programs
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
May 2010 • Report No. 10 – 04
page 2
Department helps ensure egg safety and quality
State inspectors inspect eggs and egg products at
laying facilities, wholesalers, and retail stores. Eggs
are a common source of foodborne illness
outbreaks caused by Salmonella Enteritidis.
The risk is reduced by properly handling, washing,
and refrigerating eggs during processing,
transportation, and storage.
The cost of inspections is covered by industry fees.
The frequency of wholesaler and retailer inspections
depends on the volume of eggs they sell.
Produce is particularly susceptible to contamination
because it is typically grown in a natural
environment. In addition, unlike animal products, it is
usually consumed raw rather than cooked.
The USDA introduced a program in 1999 to
promote voluntary produce safety audits, which the
industry pays for. These audits examine growing
and handling practices at farms, packing facilities,
and warehouses. In some states, the produce
industry has worked to develop marketing
agreements addressing produce safety. For
example, Arizona and California have voluntary leafy
green product agreements where participants agree
to specific safety standards and annual audits.
Historically, department inspections focused on
quality standards such as color, shape, and size.
However, the Department is focusing more on
promoting produce safety. It is training inspectors to
do USDA food safety audits and promoting the
audits.
The Department could use more of its federal grant
monies to fund projects to promote food safety
audits, such as helping small farmers prepare for
and receive audits.
Food defense refers to protecting food products
from intentional contamination. Although reported
cases are sporadic, experts believe the threat is
plausible and the effects could be far-reaching.
Although the USDA and U.S. Food and Drug
Administration have written federal food defense
guidelines, these guidelines are voluntary.
Department meat and poultry inspectors look for
potential security vulnerabilities—such as water
systems, receiving and shipping areas, and access
to sensitive areas—when inspecting, but they
cannot require or enforce security measures. Dairy
and produce inspectors’ roles are even more
limited.
Currently, food defense rests largely with the
industry, and industry efforts vary primarily based on
size, with larger facilities focusing more on security.
The Department should take more steps to promote
food defense at all of the facilities it regulates. For
example, as it has done with meat and poultry
facilities, the Department could provide all facilities it
regulates with a voluntary self-assessment tool that
would help identify security risks. The Department
could also educate the public and industry about
food defense through its Web site. In addition, the
Department should seek additional opportunities to
collaborate with federal, state, and local government
agencies to promote food security by preventing
intentional contamination.
A copy of the full report is available at:
www.azauditor.gov
Contact person:
Shan Hays, (602) 553-0333
Office of the Auditor General
TABLE OF CONTENTS
continued
page i
Introduction & Background 1
Finding 1: Dairy safety program costs should be shared with
industry 7
Department oversees dairy product safety 7
State pays for dairy inspection program but faces economic challenges 8
State and industry should share inspection program costs 12
Recommendations 15
Finding 2: State should consider transferring meat and
poultry inspections to USDA 17
USDA and Department help ensure safe meat and poultry in Arizona 17
State could transfer all meat and poultry inspections to USDA 20
Transferring inspections would likely have minimal impacts to state-inspected
establishments 22
Alternatively, State could increase fees to cover costs 25
Recommendations 26
Finding 3: Department helps to ensure egg safety and
quality 29
Eggs commonly linked to foodborne illness 29
Department inspects and grades eggs 30
Federal regulations also address egg safety 32
TABLE OF CONTENTS
continued
page ii
State of Arizona
Finding 4: Department can further promote produce safety 33
Produce safety is a national concern 33
Department can do more to promote produce safety 36
Recommendation 40
Finding 5: Department should better promote preventative
food defense measures 41
Intentional contamination of food is a risk 41
Department should help industry protect food supply 43
Recommendations 47
Appendix A: Methodology a-i
Agency Response
Tables:
1 Schedule of Revenues, Expenditures, and Changes in Fund Balances
Fiscal Years 2008 and 2009
(Unaudited) 4
2 Dairy License and Permit Types, and Number of Licenses and Permits
October 2009
(Unaudited) 9
Office of the Auditor General
TABLE OF CONTENTS
concluded
page iii
Tables (Continued):
3 Dairy Inspection Program Areas, Regulatory Activities, and Inspection
Frequencies 10
4 Dairy Inspection Program Licensing Fees 11
Figures:
1 Mississippi Joint Legislative Committee on PEER
Structured Fee-Setting Process Developed for State
Government 14
2 States with and without State Meat and Poultry Inspection Programs and
Commercial Red Meat Production by State
Calendar Year 2008
(In Millions of Pounds) 21
3 Percentage of U.S. Fresh Market Vegetable and Melon
Production by State for 24 Selected Crops
Calendar Year 2008 Estimates 37
Photos:
1 Egg Candling 31
State of Arizona
The Office of the Auditor General has conducted a performance audit of the
Department of Agriculture (Department) pursuant to a November 3, 2009, resolution
of the Joint Legislative Audit Committee. This is the first in a series of two reports on
the Department and was conducted as part of the sunset review process prescribed
in Arizona Revised Statutes (A.R.S.) §41-2951 et seq. This audit focuses on the
Department’s food safety and quality assurance inspection programs and identifies
options the State should consider regarding their scope and funding. The second
report will focus on the 12 statutory sunset factors.
The Legislature established the Department in 1989 to provide uniform and
coordinated agricultural programs and policies in Arizona. The Department’s
mission is “to regulate and support Arizona agriculture in a manner that encourages
farming, ranching, and agribusiness while protecting consumers and natural
resources.” One way in which the Department protects consumers is to help ensure
the safety and quality of food produced in Arizona. In 2008, the State produced
approximately 408.3 million pounds of commercial red meat, 4.3 billion pounds of
milk, and 3.3 billion pounds of vegetables and melons. Notably, Arizona was the
nation’s 12th largest producer of milk and the 3rd largest producer of vegetables and
melons in that year.
Food safety and food defense
Recent outbreaks of foodborne illnesses and an increased awareness of homeland
security have renewed national focus on food safety and food defense. Although
food safety and food defense are often highly interrelated, food safety refers to
protecting food from unintentional contamination while food defense refers to
protecting food from intentional contamination (see Finding 5, pages 41 through 47,
for more information on food defense). Contaminated food can lead to serious
illness or death and can have significant economic costs. The U.S. Centers for
Disease Control and Prevention (CDC) estimates that there are about 76 million
cases of foodborne illness in the nation each year. Although most of these cases are
mild, the CDC estimates that about 325,000 people are hospitalized and about 5,000
people die from foodborne illnesses each year. Children, pregnant women, the
elderly, and people with compromised immune systems have a higher risk for severe
illness.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
The annual economic cost of foodborne illness is in the billions of dollars. For
example, the U.S. Department of Agriculture (USDA) estimated in 2000 that the
annual cost of medical care, productivity losses, and premature deaths from
foodborne illnesses caused by five major pathogens—accounting for just 3.4 million
of the estimated 76 million cases—was approximately $6.9 billion.1 Other economic
costs can include those that more directly impact the food industry, such as product
recalls and loss of consumer confidence.
Food can become contaminated at any point in the food supply chain—on farms, in
processing plants, during transportation, or in restaurants and consumers’ homes.
Most contamination involves bacteria such as E. coli or Salmonella, but viruses,
parasites, fungi, and chemicals can also cause foodborne illness. According to the
Center for Science in the Public Interest, the foods most commonly linked to
foodborne illness outbreaks include seafood, produce, poultry, beef, and eggs.2
Consuming raw foods may increase the risk of illness because potential pathogens
are not killed like they would be through cooking or pasteurization. In addition, foods
made from multiple animals or plants, such as ground beef or bagged salad, have
a greater risk of contamination because a pathogen in one animal or plant can
contaminate the whole batch.
Food safety in Arizona
The nation’s food safety system is a complex partnership of federal, state, and local
agencies. At the federal level, 15 agencies have food safety roles, but primary
responsibility is under the U.S. Food and Drug Administration (FDA) and the USDA.
Although the federal government has primary responsibility for food safety, state and
local governments perform much of the food safety work. In Arizona, the
Departments of Health Services and Agriculture share responsibility for food safety.
 Department of Health Services—The Department of Health Services is generally
responsible for overseeing the safety of food and drink provided for human
consumption. It administers a state-wide public health sanitation program to
enforce state food safety regulations, which are consistent with the FDA’s 1999
Model Food Code. Many of the program’s responsibilities have been delegated
to the State’s 15 county health departments. The Department of Health Services
and the county health departments license or permit and routinely inspect food
establishments (such as food manufacturing facilities, food warehouses,
restaurants, and grocery stores) and bottled water facilities to evaluate food
safety practices and sanitary conditions. The Department of Health Services
also monitors and helps investigate foodborne illnesses throughout the State. In
fiscal year 2009, there were 34 confirmed foodborne illness outbreaks in Arizona
1 Crutchfield, S.R., & Roberts, T. (2000). Food safety efforts accelerate in the 1990’s. Food Safety, 23(3), 44-49. Retrieved
December 23, 2009, from http://www.ers.usda.gov/publications/foodreview/septdec00/FRsept00h.pdf
2 The Center for Science in the Public Interest is a nonprofit organization that seeks to improve public health through work on nutrition and
food safety issues. Center for Science in the Public Interest. (2008). Outbreak alert 2008: Closing the gaps in our federal food-safety net.
Retrieved September 21, 2009, from http://www.cspinet.org/new/pdf/outbreak_alert_2008_report_final.pdf
State of Arizona
page 2
that sickened 362 people. Although the food vehicle was not identified for many
of these outbreaks, some of the outbreaks were tied to chicken, ground beef,
peanut butter, and cookie dough. In one of these outbreaks, 20 people were
sickened by contaminated sprouts grown in Arizona.
 Department of Agriculture—The Department helps ensure the safety and quality
of dairy, meat and poultry, eggs, and produce through various inspection
programs (see the next section). It also monitors animal health and agricultural
pests to help prevent harmful diseases and pests that could affect the food
supply. In addition, the Department monitors agricultural workers to ensure the
proper use of pesticides. The Department’s State Agricultural Lab supports
these programs through various analyses, such as testing food samples for
pathogens and identifying harmful agricultural pests.
Department’s food safety programs and program
budgets
The Department helps ensure the safety and quality of dairy, meat and poultry, eggs,
and produce through several inspection programs. Generally, the programs license
and inspect companies that produce, process, handle, transport, or store these
foods to ensure compliance with federal and/or state laws and standards. As of
December 2009, the Department reported that it had a total of 121.35 full-time
equivalent (FTE) positions for these programs, of which 42.25 positions were vacant.
The programs’ funding sources vary. For example, the dairy inspection program is
paid for almost entirely with State General Fund monies, while the egg inspection
program is paid for entirely by industry fees. Table 1 (see page 4) shows each
program’s revenues and expenditures for fiscal years 2008 and 2009. The total fiscal
year 2010 budget for these programs was $5.75 million as of February 2010,
including the budget reductions passed in December 2009.1 Specifically, the
Department’s inspection programs include:
Dairy Inspection Program (4.76 FTEs, 0 vacancies)—Through its dairy
inspection program, the Department regulates the production and processing
of Arizona dairy products by licensing (or permitting) and inspecting dairy farms,
plants, transporters, and other related companies (see Finding 1, pages 7
through 16). The program enforces nationally accepted standards adopted by
the State that allow the Arizona dairy industry to ship grade “A” milk products in
interstate commerce. The Department issued 423 licenses during fiscal year
2009. The program is primarily paid for by the State General Fund. As of
February 2010, the program’s budget for fiscal year 2010 was $359,165.
1 Laws 2009, 5th S.S., Ch. 1, §1, reduced the Department’s State General Fund lump sum appropriation by $696,100 and
its Citrus, Fruit and Vegetable Revolving Fund appropriation by $72,000.
Office of the Auditor General
page 3
State of Arizona
page 4
Animal Products Food Safety
and Quality Inspection Program
Fresh Produce Standardization
and Inspection Program
Meat and Poultry
Inspection
Dairy
Inspection
Egg
Inspection
Citrus, Fruit and
Vegetable
Standardization
Federal-State
Inspection
Service Total
Fiscal Year 2008
Revenues:
State General Fund appropriations $1,040,715 $390,065 $1,430,780
Federal grants 605,570 605,570
Inspection fees and other charges $784,376 $3,393,433 4,177,809
License and fees 2 3,652 3,448 $623,031 167,075 4,650 801,856
Other 3,976 16,878 55,476 76,330
Remittances to the State General Fund (496,412) (3,448) (499,860)
Total net revenues 1,153,525 390,065 627,007 968,329 3,453,559 6,592,485
Expenditures and operating transfers:3
Personal services and related benefits 919,691 328,338 595,300 751,606 2,482,778 5,077,713
Professional and outside services 7,343 1,680 441,626 450,649
Other expenditures and operating transfers 4 113,681 61,727 83,454 143,681 316,344 718,887
Total expenditures and operating transfers 1,040,715 390,065 678,754 896,967 3,240,748 6,247,249
Net change in fund balances $ 112,810 $ -0- $ (51,747) $ 71,362 $ 212,811 $ 345,236
Fiscal Year 2009
Revenues:
State General Fund appropriations $ 896,579 $386,639 $1,283,218
Federal grants 525,906 525,906
Inspection fees and other charges $776,265 $3,195,507 3,971,772
License and fees 2 16,402 20,586 $781,107 183,675 7,348 1,009,118
Other 711 10,124 30,823 41,658
Remittances to the State General Fund (490,083) (3,794) (493,877)
Total net revenues 948,804 403,431 781,818 970,064 3,233,678 6,337,795
Expenditures and operating transfers 3
Personal services and related benefits 787,615 328,411 629,770 659,797 2,345,688 4,751,281
Professional and outside services 4,774 157 62,784 413,722 481,437
Other expenditures and operating transfers 4 104,190 58,228 71,698 274,459 284,027 792,602
Total expenditures and operating transfers 896,579 386,639 701,625 997,040 3,043,437 6,025,320
Net change in fund balances $ 52,225 $ 16,792 $ 80,193 $ (26,976) $ 190,241 $ 312,475
Table 1: Schedule of Revenues, Expenditures, and Changes in Fund Balances1
Fiscal Years 2008 and 2009
(Unaudited)
1 The table does not include the Leafy Green Products Shipper Marketing Agreement because the Department provides only legal and
administrative services for the agreement.
2 Laws 2008, Ch. 291, §12, permitted the Department to raise fees to generate up to $1.1 million during fiscal year 2009; therefore, the Department
increased licensing fees for meat and poultry and dairy inspection programs.
3 Administrative adjustments are included in the fiscal year paid.
4 Amounts include monies transferred to the State General Fund in accordance with Laws 2008, Ch. 53, §23, and Ch. 285, §46. Specifically, for
fiscal years 2008 and 2009, $7,500 was transferred from the Egg Inspection Program (both fiscal years); $9,400 and $35,100 from the Citrus,
Fruit and Vegetable Standardization Program; and $25,400 and $25,500 from the Federal-State Inspection Service Program.
Source: Auditor General staff analysis of the Arizona Financial Information System (AFIS) Accounting Event Transaction File for fiscal years 2008 and
2009.
 Meat and Poultry Inspection Program (17.64 FTEs, 7 vacancies)—The
Department licenses companies that slaughter, process, distribute, transport,
and store meat and poultry products and maintains a federal-state cooperative
program that regulates the slaughter and processing of meat and poultry
products sold within the State (see Finding 2, pages 17 through 27). The
Department issued 236 licenses during fiscal year 2009. The USDA pays for
approximately 50 percent of the program’s direct costs, plus some additional
money to cover indirect costs. The remaining costs are primarily paid for by the
State General Fund. As of February 2010, the program’s budget for fiscal year
2010 was $828,050.
 Egg Inspection Program (15 FTEs, 3 vacancies)—The Department licenses
companies that sell eggs wholesale in Arizona and inspects eggs at laying
facilities, wholesalers, and retail stores to enforce state egg laws and regulations
(see Finding 3, pages 29 through 32). The Department issued 82 licenses
during fiscal year 2009. In addition, the USDA contracts with the Department to
provide egg-grading services to the industry upon request. The Egg Inspection
Program is paid for by the egg industry. As of February 2010, the program’s
budget for fiscal year 2010 was $866,700.
 Citrus, Fruit and Vegetable Standardization Program (20 FTEs, 12.75
vacancies)—The Department licenses produce dealers, packers, and shippers
through its Citrus, Fruit and Vegetable Standardization Program. The
Department issued 525 licenses during fiscal year 2009. Historically, the
standardization program inspected fresh produce to enforce state quality
standards that include factors such as size, color, and shape. The program also
provides administrative services for a marketing agreement created in 2007 with
Arizona’s leafy greens industry designed to promote safe growing and handling
practices through food safety audits. In 2009, the Department began changing
the program’s focus from quality standards to food safety (see Finding 4, pages
33 through 40, for more information about the standardization and the leafy
greens marketing agreement). The leafy greens industry pays for and runs the
marketing agreement. The produce industry pays for the standardization
program. As of February 2010, the standardization program’s budget for fiscal
year 2010 was $630,625.
 Federal-State Inspection Service Program (63.95 FTEs, 19.5 vacancies)—Since
1996, the USDA has contracted with the Department to perform various federal
inspection services and enforce U.S. import requirements at the Arizona-Mexico
border. The inspection services are generally voluntary and performed at
produce sellers’ or buyers’ request. Generally, these inspections focus on
ensuring grade or quality standards, but one service entails food safety audits
at growers’ or packers’ request as part of the USDA’s Good Agricultural
Practices and Good Handling Practices (GAP/GHP) Audit Verification Program
(see Finding 4, pages 33 through 40, for more information about the GAP/GHP
Office of the Auditor General
page 5
audit program). The Federal-State Inspection Service Program is paid for by
industry fees. As of February 2010, the program’s budget for fiscal year 2010
was $3,065,460.
Audit scope and objectives
This audit focused on the Department’s role in food safety and defense related to
Arizona-produced agricultural products. Specifically, the audit focused on the four
foods the Department regulates—dairy, meat and poultry, eggs, and produce—and
their respective inspection programs. In addition to examining food safety and food
defense issues related to these programs, the audit identified options the State
should consider regarding the programs’ scope and funding.
This audit was conducted in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our
audit objectives.
The Auditor General and staff express appreciation to the Director of the Department
and his staff for their cooperation and assistance throughout the audit.
State of Arizona
page 6
Dairy safety program costs should be shared with
industry
The Department of Agriculture (Department) should propose fee changes that would
increase the dairy industry’s share of the costs for the Department’s dairy inspection
program. The Department helps ensure the safety of Arizona milk and milk products
by licensing and inspecting dairy industry facilities and testing dairy products to verify
compliance with milk product safety standards. Historically, the Department has
funded its dairy inspection program primarily through State General Fund monies,
but the Department is facing significant budget cuts. Because both the industry and
the public receive benefits from the dairy program, the State should share more of
the costs of the dairy inspection program with the industry, as is done in some other
states auditors reviewed. In developing a proposal for modifying fees, the
Department should consider several factors, including ways to equitably allocate
costs, the impact on the dairy industry, and the efficiency of department operations,
including any opportunities to reduce the level of regulation.
Department oversees dairy product safety
The Department regulates the safety of milk and milk products in Arizona by
enforcing national and state sanitation and safety standards. In 2008, dairy products
were ranked as Arizona’s most valuable agricultural commodity, generating 22
percent of all farm-related receipts and producing over 4.3 billion pounds of milk. By
statute, the State has adopted national standards called the pasteurized milk
ordinance for grade “A” milk and dairy products (see textbox, page 8).1 In addition,
statute requires the Department to regulate manufactured products, such as cheese,
butter, and frozen desserts, according to the U.S. Department of Agriculture’s
(USDA) general specification for dairy plants. The pasteurized milk ordinance was
developed jointly by the U.S. Food and Drug Administration (FDA), state regulatory
agencies, and the dairy industry, and represents the minimum standards adopted in
all 50 states. The FDA reviews the Department’s program every 3 years to ensure that
the Department is adequately enforcing the ordinance. The FDA’s most recent
Dairy products were
Arizona’s most valuable
agricultural commodity
in 2008.
1 Arizona Revised Statutes (A.R.S.) §3-605 adopts the federal milk ordinance, which is defined in A.R.S. §3-601(5) as the
FDA’s grade “A” pasteurized milk ordinance.
Office of the Auditor General
page 7
FINDING 1
review, published in February 2008, found that the Department was in substantial
compliance with the ordinance’s requirements.
To ensure compliance with the state and national standards, the Department licenses
or permits companies and individuals, inspects farms and facilities, and tests samples
of milk products. As shown in Table 2 (see page 9), as of October 2009, the
Department had permits or licenses for approximately 120 dairy farms and numerous
other individuals and companies that transport, sample, process, and distribute milk
and milk products. The Department’s inspections evaluate overall sanitation and other
specific processes and conditions (see Table 3, page 10). For example, auditors
observed department staff conducting two unannounced dairy farm inspections.
During the 2-hour visit to each farm, the department inspector performed inspection
activities such as ensuring that milk houses were clean and had hand-washing
facilities, and that equipment properly protected milk during transfer. The pasteurized
milk ordinance requires dairy farms to be inspected at least once every 6 months.
State pays for dairy inspection program but faces
economic challenges
Although the dairy industry pays some licensing fees, the State General Fund pays for
almost all of the dairy inspection program’s costs. However, the Department is facing
significant budget cuts that may affect the program. The dairy industry has also
experienced an economic downturn that may be ending.
State of Arizona
page 8
Grade “A” pasteurized milk ordinance.
The pasteurized milk ordinance is a nationally recognized milk sanitation and
safety standard for grade “A” milk and milk products. The FDA developed the
ordinance in collaboration with state regulatory agencies and the dairy industry.
It is used in all 50 states as the basis for certifying companies that ship dairy
products interstate through a federal-state cooperative program. Although the
FDA ultimately has legal jurisdiction over dairy products shipped in interstate
commerce, states carry out most of the monitoring and enforcement that the
ordinance requires under FDA oversight.
Source: Auditor General staff analysis of the grade “A” pasteurized milk ordinance, 2005 revision; Taylor,
M.R., & David, S.D. (2009). Stronger partnerships for safer food: An agenda for strengthening state
and local roles in the nation’s food safety system. Retrieved April 17, 2009, from
http://www.thefsrc.org/State_Local/statelocal_report_release.htm
Office of the Auditor General
page 9
Number of Licens es or
Permits
Dairy (permit) 117
A farm where milk is produced. Although statute does not require dairy farms to
obtain a license to operate, the pasteurized milk ordinance, which is adopted by
statute, requires dairy farms to obtain a permit.
Milk hauler/sampler 289
A person who transports raw milk or raw milk products to or from a dairy, milk
plant, or other milk station. Licensees are also authorized to collect raw milk
samples for laboratory testing.
Producer-distributor 6
A dairy farm that processes and distributes grade “A” milk using milk from its own
farm.
Producer-manufacturer 1
A dairy farm that manufactures and distributes milk products, such as cheese or
butter, using milk from its own farm.
Milk distributing plant 8
A plant that processes and distributes grade “A” milk and milk products.
Manufacturing plant 14
A plant that manufactures milk products, such as cheese or butter. These plants
commonly use grade “B” milk, which is not subject to the pasteurized milk
ordinance, to manufacture the products.
Wholesale distributor 60
A warehouse where finished liquid milk products or other milk products such as
cheese and cream are stored at cold temperatures before shipping to smaller
retailers.
1 License or Permit Type and Definition
1 Because the table is current as of October 2009, the total number of licenses and permits listed in the table does not
equal the total number of dairy licenses issued during fiscal year 2009 (reported in the Introduction and Background
section of this report).
Source: Auditor General staff analysis of A.R.S. §§3-601, 3-605, 3-607, and 3-619; the grade “A” pasteurized milk ordinance,
2005 revision; and information on dairy licenses and permits provided by department staff.
Table 2: Dairy License and Permit Types, and Number of Licenses and Permits
October 2009
(Unaudited)
Dairy industry pays almost none of the Department’s regulatory
costs—As of fiscal year 2009, the State General Fund paid for almost all of the
dairy inspection program’s costs. Licensing fees have generally offset less than 1
percent of these costs, and even with fiscal year 2009 increases, fees offset only
approximately 5 percent of the costs. For example, in fiscal year 2008, the
Department received $3,448 in licensing-fee revenue, which offset $390,065 in
program costs, not including costs incurred by the State Agricultural Laboratory for
testing milk and dairy product samples. Historically, statutory licensing fees for the
dairy program have not increased for over 50 years, with one minor exception.1
However, the Legislature authorized temporary fee increases in fiscal years 2009
and 2010 (see Table 4, page 11, for the statutory and temporary fees). In fiscal year
2009, the Department collected $20,586 in dairy-licensing fees because of the
temporary increase.2 In addition, the Department has been concerned with the
funding of the dairy program and discussed these concerns with some industry
representatives beginning in January 2008.
Department and dairy industry face economic challenges, but
industry shows signs of recovery—The Department has faced significant
budget cuts in fiscal years 2009 and 2010. According to a department official, the
Department has tried to minimize the impact of budget cuts on the dairy inspection
program to maintain food safety and compliance with the statutorily required
pasteurized milk ordinance. The pasteurized milk ordinance is the accepted
national standard for milk, and failing to perform the ordinance requirements could
jeopardize the Arizona dairy industry’s ability to market milk products in other
states. According to an industry representative, almost all of the dairy plants in
State of Arizona
page 10
Inspection Area Examples of Regulatory Activities
Minimum Inspection
Frequency
Dairy Farms Inspect facility, equipment, milking procedures, and test water used to
chill milk
Sample and test the water supply
6 months
3 years
Transportation Inspect hauler/sampler’s sampling procedures
Inspect milk tank trucks
Inspect truck-cleaning facilities and transfer stations
24 months
12 months
6 months
Plants Inspect facilities and test pasteurization equipment at milk-distributing
plants
Inspect facilities and test pasteurization equipment at manufacturing
plants
3 months
6 months
Dairy Product
Testing
Test raw milk samples from each farm and finished products from each
plant at the State Agricultural Laboratory
4 in 6 months
Source: Auditor General staff analysis of the grade “A” pasteurized milk ordinance, 2005 revision; A.R.S. §3-622, USDA’s
general specifications for dairy plants; and department inspection forms, staff interviews, and Auditor General
staff observations of dairy inspections.
Table 3: Dairy Inspection Program Areas, Regulatory Activities, and Inspection Frequencies
1 Fees have not increased since 1951, with the exception of the wholesale distributor license, which was added in 1962.
2 Laws 2008, Ch. 291, §12, and Laws 2009, 4th S.S., Ch. 3, §23, authorized the Department to increase fees for fiscal years
2009 and 2010.
The Department has
tried to minimize the
impact of budget cuts
on the dairy inspection
program.
Arizona have out-of-state business. Program officials reported that, in response to
budget constraints, the Department has limited staff training and travel
expenditures. Further, one official stated that program staffing is at the minimum
necessary to support the Department’s food safety mandates and meet the
requirements of the pasteurized milk ordinance. On February 1, 2010, the
Department reduced the program’s budget in response to Laws 2009, 5th S.S.,
Ch. 1, §1, and the impact on program activities was unknown as of February 3,
2010.1
The dairy industry also experienced an economic downturn in fiscal year 2009.
Specifically, that year’s milk price declined from $18.40 per hundredweight in
August 2008 to $11.30 per hundredweight in June 2009 before beginning to rise
again.2 Milk prices fluctuate with the supply of milk and other factors. For example,
the calendar year average price per hundredweight was $12.88 in 2006, $19.13 in
2007, and $18.32 in 2008. As of early December 2009, a department official
reported that ten Arizona dairy farms had closed since July 2008, including
closures to clear land for development as well as temporary closures where the
farmers planned to restore their herds when prices increase. Prices had increased
to $16.30 per hundredweight in December 2009, and according to one industry
analyst, the 2009 downturn was ending and prices were expected to remain
higher.3
Office of the Auditor General
page 11
Annual Fee
License or Permit Type Statutory Fee Temporary Fee1
Dairy No fee No fee
Milk hauler/sampler $5 (initial)
$1.50 (renewal)
$50 (initial)
$30 (renewal)
Producer-distributor $25 $150
Producer-manufacturer $25 $150
Milk distributing plant $50 $300
Manufacturing plant $50 $100
Wholesale distributor $25 $100
1 Laws 2008, Ch. 291, §12, and Laws 2009, 4th S.S., Ch. 3, §23, authorized the Department to increase
fees for fiscal years 2009 and 2010.
Source: Auditor General staff analysis of A.R.S. §§3-607 and 3-619 and dairy inspection program
licensing fees information provided by department staff.
Table 4: Dairy Inspection Program Licensing Fees
1 Laws 2009, 5th S.S., Ch. 1, §1, reduced the Department’s State General Fund lump sum appropriation by $696,100 and
its Citrus, Fruit and Vegetable Revolving Fund appropriation by $72,000.
2 All figures in this paragraph are from the USDA Economic Research Service. (2010, January 26). U.S. dairy situation at a
glance. Retrieved February 12, 2010, from http://www.ers.usda.gov/publications/ldp/LDPTables.htm; USDA Economic
Research Service. (2009, November 24). U.S. dairy situation at a glance. Retrieved December 4, 2009, from
http://www.ers.usda.gov/publications/ldp/LDPTables.htm
3 The Commodity Update: The Monthly Newsletter for Multi-Unit Foodservice Purchasing Executives. (2009, October 8).
Dairy update, 19(10), 3. Retrieved December 3, 2009, from http://www.mktvsn.com/MarketVision_CommodityUpdate.pdf
State and industry should share inspection program
costs
According to guidance on setting government user fees, because the industry
benefits from the dairy inspection program’s work, it should also help support the
cost of regulation. In four of ten other states’ dairy inspection programs that auditors
reviewed, industry fees provide most of the programs’ funding, and of the six states
funded similarly to Arizona using primarily general fund monies, four states use fees
to provide a higher portion of the costs than in Arizona. The Department should
propose fee changes to have the industry share a greater portion of the dairy
inspection program costs. The proposed fees should be determined using a fee-setting
approach that considers what portion of the cost should be shared, any
possible ways to cut costs in the existing program, and the impact of any fee
increases on the industry.
Dairy inspection program costs should be shared with the
industry—Fee-setting principles can guide decisions about the amounts
industry and government should pay for regulation. According to guidance on
setting user fees in government, the parties that benefit from a government
program should help pay for the regulatory costs.1 For example, the egg industry
pays fees to the Department to cover the cost of regulation for egg inspection
services that benefit the egg industry. The dairy inspection program benefits both
the industry and the public. Specifically, the dairy industry benefits from the ability
to market milk interstate while the public benefits from the assurance that dairy
products are produced and processed safely as outlined in the pasteurized milk
ordinance. In addition, the industry may benefit from an enhanced public
perception of product quality and safety. According to department officials,
industry members are generally not opposed to paying higher fees as long the
monies are used for the program and not transferred to the General Fund.
Some other states share more of the cost with industry—In some other
states surveyed, the industry generally pays more of the cost of dairy inspection
than in Arizona. Auditors reviewed dairy inspection program funding in six western
states and four states with milk production volume similar to Arizona’s.2 According
to officials in those states:
 Four of the ten states fund a majority of their dairy inspection program costs
through industry fees. For example, since at least 1997, Ohio statute has
allowed the state to charge up to 63 percent of the dairy inspection program
cost to the industry through licensing and inspection fees such as an
inspection fee based on the amount of raw milk or dairy product used at
State of Arizona
page 12
1 United States Government Accountability Office. (2008). Federal user fees: A design guide (GAO-08-386SP). Washington,
D.C.: Author.
2 States contacted include six western states—California, Colorado, Idaho, New Mexico, Utah, and Washington—and four
additional states with similar milk production volume—Indiana, Iowa, Ohio, and Vermont.
The dairy industry
benefits from the
inspection program.
Four states pay most of
their dairy inspection
program costs through
industry fees.
processing plants and frozen dessert manufacturers. According to an Ohio
official, although industry fees covered as little as 40 percent of costs in fiscal
year 2001, as of fiscal year 2010, industry fees covered nearly the full 63
percent allowed by law. Similarly, industry fees covered 83 percent of
California’s dairy inspection program costs in 2008. California charges various
fees such as licensing fees, penalties, and assessments based on the type of
work inspectors perform and the size of the facility needing inspection.
According to a California program official, although the percentage of
program costs covered by fees can vary somewhat each year, the practice of
charging fees to the industry has existed for at least the past 5 years. Further,
according to an official in Idaho, industry fees have covered nearly 100
percent of its dairy inspection program costs for the past 30 years. Finally,
according to an Iowa dairy program official, about 80 percent of the program
budget has come from industry fees.
 Among the six states that use mainly general fund monies to pay for their dairy
inspection programs, four share a higher percentage of their programs’ costs
with the industry than Arizona does. According to officials in these states,
industry fees have covered between 5 percent and 17 percent of their
programs’ costs compared to less than 1 percent in Arizona in fiscal year
2008.1 For example, in Washington, industry fees have covered 17 percent.
Further, dairy program officials in both Vermont and Utah stated that their
programs are about 7 percent funded by fee revenue. Finally, according to a
Colorado dairy inspection program official, fees covered approximately 5
percent of Colorado’s total program costs after fees were increased in fiscal
year 2009.
Department should propose fee changes—The Department should take
steps to reevaluate the current fee structure for the dairy inspection program and
propose changes for legislative consideration that would increase the industry’s
share of the program costs. Because the dairy inspection program benefits both
the industry and the public, it may be appropriate for the industry to share more of
the regulatory costs. In determining how the costs will be shared, the Department
should use a structured approach that takes several variables into account.
Mississippi’s Joint Legislative Committee on Performance Evaluation and
Expenditure Review (PEER) developed an approach that the Department might
find useful.2 PEER’s approach consists of a decision model for establishing or
increasing government fees, called the Theory of Fee Setting in Government, and
guidance on implementing new fees. Figure 1 (see page 14) summarizes key
concepts from PEER’s approach. Similarly, in 2008, the U.S. Government
Accountability Office issued a design guide for federal user fees that offers similar
suggestions for setting fees. By taking a structured approach, the Department
would consider several factors from these guidelines, including:
1 In fiscal year 2009, Arizona’s fees were temporarily increased and covered approximately 5 percent of the program’s
costs. The fees were also increased for fiscal year 2010.
2 Joint Legislative Committee on Performance Evaluation and Expenditure Review: (2002). State agency fees: FY2001
collections and potential new fee revenues. Jackson, MI: Author.
Office of the Auditor General
page 13
State of Arizona
page 14
Determine whether fees or taxes should fund the service
Who benefits from the service: individuals, the public, or both?
Fees should finance services that benefit individuals.
Taxes should finance services that benefit the public.
When both individuals and the public benefit from a service, financing can come from
both fees and taxes.
Identify and analyze legal issues
Are fees limited by statute? If so, is legislation required to change them?
Should administrative rules be revised?
Identify the fees’ purpose
Should fees cover the cost of providing the service?
Should fees be set to influence behavior?
Should fees be set to encourage compliance with program regulation and goals?
Assess factors influencing fees amount
What effect will fees have on those who pay them?
What effect will fees have on annual revenue?
What do similar states charge for the service?
Will the public accept the fees’ necessity?
Is the Department subsidizing other government operations?
Determine appropriate methodology for setting fees
Determine if there is a comprehensive cost accounting system.
Seek to reduce costs as much as possible.
Measure direct and indirect costs of the time staff spends in service activities.
Determine economic impact on regulated entities.
Implement fees
Obtain amended legislation and regulation as needed.
Prepare those who pay fees for changes by providing advanced notice and explaining the
purpose and reasoning of new fees.
Train staff to answer questions regarding the new fees.
Periodically assess revenue, costs, and program outcomes to
update fee amounts
Source: Auditor General staff analysis of fee-setting model included in the State agency fees: FY
2001 collections and potential new fee revenues report prepared by the Mississippi Joint
Legislative Committee on PEER.
Figure 1: Mississippi Joint Legislative Committee on PEER
Structured Fee-Setting Process Developed for State
Government
 Funding mix—The Department should consider what portion of total dairy
inspection program costs the industry should pay based on program benefits to
the industry. All program-related costs should be included, and the Department
should ensure that it has an adequate process for tracking direct and indirect
cost data for the dairy inspection program, including dairy product testing at the
State Agricultural Laboratory. The Department should then consider how it could
equitably allocate the industry portion of costs among different types of industry
members based on the work required to regulate each member, such as farms,
plants, and milk haulers/samplers.
 Costs and efficiency of department operations—The Department should
evaluate the dairy inspection program’s efficiency to ensure that program costs
are not higher than necessary to complete its work. In addition, the Department
could consider whether to propose separate fees for activities such as follow-up
inspections that department staff conduct to ensure that licensees correct
problems discovered during inspections. As part of its review, the Department
should consider whether it can reduce costs by reducing the amount of
regulation it provides. However, because the Department enforces the
pasteurized milk ordinance, which is the basic nationally accepted standard, it
may not be able to significantly decrease its regulatory role without affecting the
industry’s ability to market its products.
 Impact on the industry—The Department should consider how the fees would
affect industry members. For example, some licensees may be less able than
others to absorb or pass on additional regulatory costs because of the size or
nature of their business. The Department should obtain stakeholders’ input in
developing its proposal, and, if proposed fees are significantly higher than
existing fees, it might recommend gradually phasing in fee increases.
Because dairy program fees and regulatory requirements are established in statute,
the Department should develop a proposal for legislative consideration, including a
recommended timetable for gradually implementing any significant changes.
Recommendations:
1.1. The Department should propose fees to the Legislature that would increase
the industry’s share of the dairy inspection program’s costs. In developing the
proposal, the Department should:
a. Consider what portion of total program costs the industry should pay
based on program benefits to the industry;
Office of the Auditor General
page 15
The Department should
obtain industry input
regarding how
increased fees would
impact industry
members.
b. Ensure that it has an adequate process for tracking direct and indirect cost
data for the dairy inspection program, including dairy product testing at the
State Agricultural Laboratory;
c. Develop equitable fees that address factors that influence cost, such as the
work required to regulate different members of the dairy industry;
d. Evaluate the dairy inspection program’s efficiency to ensure that program
costs are not higher than necessary to complete its work, including
identifying any possible reduction in regulation that can be achieved without
affecting the industry’s ability to market its products;
e. Consider the effect fee increases may have on different establishment
types and obtain their input in proposing new fees. If proposed fees are
higher than current fees, the Department might recommend gradually
phasing in fee increases; and
f. Submit its proposal to the Legislature for consideration.
1.2. After receiving the Department’s proposal, the Legislature should consider
modifying statute to raise existing dairy inspection program fees, authorize the
Department to create additional fees, and/or modify the level of regulation the
Department provides.
State of Arizona
page 16
State should consider transferring meat and
poultry inspections to USDA
The Legislature should consider federalizing the state meat and poultry inspection
program, which the federal government will take over at no cost to the State. Both the
U.S. Department of Agriculture (USDA) and the Department of Agriculture
(Department) help ensure the safety of meat and poultry products in Arizona. The
USDA performs food safety inspections on meat and poultry sold in interstate
commerce, while the Department is part of a voluntary agreement with the USDA to
inspect meat and poultry sold within the State in a program that must be at least
equal to the federal program. If the State transferred all meat and poultry inspections
to the USDA, as is the case in 23 states, it would save the State over $400,000 in
State General Fund monies. Although such a move would pose potential impacts to
state-inspected establishments that could include transition costs, higher and more
overtime fees, and less individualized service, these impacts should not be
widespread. Alternatively, if the Legislature decides that the State should retain its
program, it should consider raising fees to cover the state program’s costs.
USDA and Department help ensure safe meat and
poultry in Arizona
Federal laws require all slaughter and processing establishments to be under federal
or state inspection to help ensure the safety of meat and poultry products. State law
allows establishments to be under either federal or state inspection, but
establishments must be under federal inspection to sell meat and poultry products
out of state. Although more Arizona establishments are under state inspection, they
produce significantly less meat than federally inspected establishments, and almost
all cattle slaughtered in Arizona are slaughtered in federally inspected
establishments.
Office of the Auditor General
page 17
FINDING 2
Federal laws require meat and poultry inspections—Meat and poultry are
some of the foods most commonly linked to foodborne illness outbreaks, and
federal laws require that all meat and poultry sold in commerce be inspected to
help ensure their safety. Specifically, the federal meat and poultry inspection acts
require inspection of slaughter and processing establishments to help ensure that
animals are disease-free, facilities are clean and sanitary, and meat and poultry
products are wholesome and properly labeled. Under these laws, the USDA is
required to inspect meat and poultry sold in interstate or foreign commerce. The
laws also allow states to inspect meat and poultry sold within state borders through
federal-state cooperative agreements, but they require state programs to be “at
least equal to” federal inspection (see textbox).
In addition, the laws exempt establishments that
slaughter or process meat and poultry for an animal
owner’s personal consumption from mandatory
inspection. However, the federal laws still require these
establishments—referred to as custom-exempt
establishments—to follow certain regulations, such as
handling livestock humanely and maintaining sanitary
conditions, and inspectors periodically review them to
determine compliance with applicable regulations. The
USDA requires states with inspection programs to
review custom-exempt establishments. Although
these laws encourage states to have inspection
programs by authorizing the USDA to cooperate with
states and reimburse states up to 50 percent of their
inspection program costs, federal law does not require
state inspection programs. Rather, in states that do not
have their own programs, the USDA inspects all
commercial and custom-exempt establishments in the
state.
USDA and Department inspect meat and poultry in Arizona—Both
federal and state inspectors help ensure the safety of meat and poultry products
in Arizona. State law establishes a state inspection program within the Department
and requires all establishments that slaughter or process meat and poultry for
commercial sale to be under either federal or state inspection. Although
establishments that slaughter or process meat and poultry for interstate commerce
must be under federal inspection, establishments that slaughter or process meat
and poultry for sale within the State may choose either federal or state inspection.
In Arizona, 27 establishments are under federal inspection, including a large
slaughter and processing plant in Tolleson, while 34 establishments are under
state inspection. Most of the state-inspected establishments are urban facilities
that process meat and poultry products, but seven establishments, including all six
State of Arizona
page 18
“At least equal to” provision
The “at least equal to” provision of the federal
meat and poultry inspection acts requires that state
inspection programs operate in a manner that is at
least as effective as, but not necessarily the same
as, the federal inspection program. States that fail
to administer programs at least equal to the federal
program can be “designated,” meaning the USDA
will take over all meat and poultry inspections. The
USDA regularly reviews state inspections
programs to determine compliance with this
provision.
Source: Auditor General staff analysis of the U.S. Department
of Agriculture Food Safety Inspection Service directive
number 5720.3. and the Federal Meat Inspection Act.
Establishments may
choose either federal or
state inspection to sell
their products within the
State.
of the state-inspected slaughterers, are in rural areas
(see textbox, which profiles two state-inspected
establishments). The Department also inspects 47
custom-exempt establishments located throughout
the State. Although there are more state-inspected
establishments, they produce significantly less meat
than federally inspected establishments. For example,
in 2008, federally inspected establishments
slaughtered over 99 percent (535,900 out of 539,100
head) of all cattle slaughtered in Arizona.1 According
to department officials, the large federally inspected
plant in Tolleson accounts for most of the cattle
slaughter in the State.
Arizona has adopted federal meat and poultry
regulations, thereby meeting the requirement that the
state program be at least equal to the federal
program, and federal and state inspectors essentially
perform the same functions at their respective
establishments. Federal and state regulations require
commercial slaughter and processing establishments
to develop and implement sanitary operating
procedures and preventative controls designed to
reduce the risk of contamination. Inspectors are
required by federal regulations to visit these
establishments each day they are in operation to
ensure that operators are following their safety plans.
For example, inspectors verify that slaughter
equipment is properly sanitized or that ready-to-eat
meat products are thoroughly cooked. Inspectors are
also required to sample meat and poultry products to
verify whether they are free of adulterants such as E. coli in raw beef products or
Listeria in ready-to-eat products. Additionally, at slaughterhouses, inspectors also
check for signs of disease in animals before and after slaughter and ensure
animals are handled humanely. Both federal and state laws prohibit the slaughter
of animals whose meat is sold for human consumption without an inspector at the
facility, and inspectors are present at all times during slaughtering. Meat and
poultry inspectors are required to inspect processing plants each day they are in
operation, but may visit several processing plants in a given day. Unlike
commercial establishments that are inspected daily, custom-exempt
establishments are reviewed less frequently, typically about once or twice per year.
1 Conversely, 86 percent (2,500 out of 2,900 head) of hogs in 2007 and 90 percent (900 out of 1,000 head) of sheep and
lamb in 2008 were slaughtered at state-inspected plants.
Office of the Auditor General
page 19
Profile of two state-inspected Arizona
establishments
Rural slaughter/processing establishment—This
establishment, located in rural Arizona, has been
state-inspected since 2007. Three days per month,
this establishment slaughters and processes meat to
sell commercially, and the rest of the month, it
slaughters and processes meat for the livestock
owners’ personal consumption. About 80 percent of
its commercial product is sold at local farmers
markets in Phoenix and Tucson. With seven full- and
part-time positions, this establishment had about
$250,000 in sales in 2008.
Urban processing establishment—This processing
establishment, located in Phoenix, produces ready-to-
eat products such as beef, chicken, and pork
burritos and sells most of them to hotels, resorts,
and restaurant chains. This establishment is under
both state and federal inspection. It has been under
state inspection since 1997, but obtained federal
inspection in 2008 for some of its products that are
sold out of state. It also has federal inspection for its
Saturday operations. Operating 6 days per week and
with nearly 40 employees, this establishment had
about $2 million in overall sales in 2008.
Source: Auditor General staff interviews with two state-inspected
establishments.
State could transfer all meat and poultry inspections to
USDA
The Legislature should consider transferring all meat and poultry inspection to the
USDA. Almost half of U.S. states already rely solely on federal inspections. In
addition, transferring all meat and poultry inspections to the USDA would save the
State money and allow more establishments to sell products out of state. Further,
transferring the function would not appear to compromise public health.
Many states do not have their own meat and poultry inspection
programs—Twenty-three states do not have their own meat and poultry
inspection programs but instead rely on federal inspection. As shown in Figure 2
(see page 21), these states include big meat-producing states such as Nebraska
and Colorado, as well as small producers such as Nevada and New Mexico.
Additionally, only 4 of the 13 western states have state meat and poultry inspection
programs. According to a 2001 study performed by Nebraska’s public policy
center, some states have not adopted meat and poultry inspection programs
because of the cost, lack of political support, or the lack of need for both a state
and federal program.1 Although other states have considered starting state meat
and poultry inspection programs, Minnesota, North Dakota, and Missouri were the
last states to do so, in 1999, 2000, and 2001, respectively. According to a North
Dakota state official, North Dakota started its program partly because farmers and
ranchers thought it would provide more opportunities for small meat producers,
and one reason legislators continue to support the program is that they feel the
state program is more responsive to the needs of the industry than the federal
program. Conversely, New Mexico was the last state to eliminate its meat and
poultry inspection program. It requested that the USDA assume responsibility for
all meat and poultry inspections in 2007.
Transferring meat and poultry inspections would have benefits—
Transferring all meat and poultry inspections to the USDA would also benefit the
State and the industry. For the State, transferring inspections would save State
General Fund monies because the USDA would take over all inspections,
including inspections at custom-exempt establishments, at no cost to the State.
Based on fiscal year 2009 program costs, transferring all meat and poultry
inspections to the USDA would have saved the State approximately $450,000 in
State General Fund monies, although the State would also have lost approximately
$77, 000 in indirect cost recovery associated with the federal funding for the state
program. In fiscal year 2010, the savings would be approximately $414,000
because the Department reduced the fiscal year 2010 budget for the meat and
poultry program by over $72,000.2
1 University of Nebraska Public Policy Center. (2001). Potential impacts of state meat and poultry inspection for the State of Nebraska.
Retrieved May 20, 2009, from http://ppc.unl.edu/userfiles/file/Documents/projects/StateMeatInspection/PotentialImpacts.pdf
2 Laws 2009, 5th S.S., Ch. 1, §1, reduced the Department’s State General Fund lump sum appropriation by $696,100.
State of Arizona
page 20
The USDA would take
over all inspections at
no cost to the State.
For the industry, federal inspections would allow current state-inspected
establishments to ship meat products across state lines. The extent to which
establishments would actually use this benefit is unclear: out of ten state-inspected
establishments auditors interviewed, only one expressed a desire to sell its meat in
interstate commerce. Still, federal inspection may provide more marketing options for
state-inspected facilities even if establishments do not sell out of state. One USDA-inspected
establishment auditors spoke with suggested that federal inspection may
carry more weight than state inspection for retailers.
Office of the Auditor General
page 21
WA
815.0
OR
57.8
CA
1,662.2
AZ
408.3
NM
5.7
AK
0.5
HI
10.8
NV
1.3 UT
520.2
WY
6.2
CO
2,133.9
ID
231.5
MT
16.6
ND
28.5
SD
1,030
NE
7,392.8
KS
5,349.6
OK
1,120.5
TX
5,167.1 LA
7.2
MS
15.5
AR
64.3
TN
225.2
AL
24.0
GA
157.1
FL
99.6
SC
251.9
NC
2,510.6
VA
507.7
KY
588.1
MO
1,690.8
IL
3,029.4
IA
7,067.8
MN
2,584.6
WI
1,449.0
IN
1,679.8
MI
524.1
OH
309.3
PA
1,336.9
NY
36.7
ME
NJ
CT RI
MA
NH
VT
WV
7.3
States with State Meat and Poultry Inspection
States without State Meat and Poultry Inspection
48.1
MD
DE
36.9
CT
MA
ME
NH
RI
VT
13.8
Figure 2: States with and without State Meat and Poultry Inspection Programs and
Commercial Red Meat Production by State1
Calendar Year 2008
(In Millions of Pounds)
1 Georgia and South Dakota have state meat inspection programs but rely on the USDA for poultry inspection.
Source: Auditor General staff analysis of states with and without state inspection programs provided by the USDA’s
Web site and USDA data on commercial red meat production by state. United States Department of
Agriculture, National Agriculture Statistics Service. (2009). Livestock slaughter 2008 summary. Retrieved
August 12, 2009, from http://usda.mannlib.cornell.edu/usda/current/LiveSlauSu/LiveSlauSu-03-06-2009.pdf
Transferring meat and poultry inspections should not compromise
public health—Arizona has adopted federal meat and poultry regulations, and
the state meat and poultry inspectors perform the same functions as federal
inspectors; therefore, transferring the inspection responsibility should have little
impact on public health. Auditors identified only one situation where the transfer
would result in reduced inspections. Specifically, according to a USDA directive,
federal inspectors typically conduct only one review per year at custom-exempt
slaughter and processing establishments that comply with federal regulations,
whereas Arizona statute requires at least two inspections per year at slaughter
establishments.1 However, because these establishments slaughter or process
meat only for an animal owner’s personal consumption, and because the USDA
directs federal inspectors to review noncompliant establishments more frequently,
having only one inspection instead of two at compliant facilities would be unlikely
to affect public health.
One concern department officials have raised about the potential change is that
the USDA may pay little attention to the issue of illegal slaughter. Under state law,
it is illegal to slaughter meat and poultry to be sold for human consumption without
an inspector present. However, federal law also prohibits slaughtering meat or
poultry to be sold for human consumption without an inspector present, and USDA
compliance officers investigate reports of this type of activity.
Additionally, department officials believe transferring inspection to the USDA could
compromise food safety because most meat and poultry recalls occur at federally
inspected plants. However, this may be because, nationally, almost all meat is
slaughtered under federal inspection. According to the USDA, between 93.7
percent and 99.1 percent of livestock slaughter in 2008 occurred in federally
inspected plants, depending on the species.2 Moreover, the USDA testified to
Congress that over 98 percent of federally inspected plants met regulatory
requirements in 2008.
Transferring inspections would likely have minimal
impacts to state-inspected establishments
Transferring meat and poultry inspections to the USDA could have some impacts to
some state-inspected facilities. Although state law already incorporates federal
facility requirements and, therefore, establishments should not incur major costs to
comply with the federal requirements, minor costs such as changing product labels
could be encountered. Further, some facilities that have overtime operations would
pay a higher rate for overtime inspections. These cost impacts, however, should not
be widespread. In addition, some department and industry representatives believe
federal inspection will not offer the individualized attention and assistance provided
1 According to a department official, state inspectors perform at least one inspection per year at custom-exempt
processors, similarly to the USDA. Statute does not establish an inspection frequency for custom-exempt processors.
2 Federally inspected livestock slaughter includes cattle, calves, hogs, and sheep.
State of Arizona
page 22
Nationally, almost all
meat is slaughtered
under federal
inspection.
by the state inspection program, but the USDA has taken several steps to improve
its outreach to smaller establishments. Nonetheless, it is possible that some plants
would not make the transition to federal inspection, and some may close.
Specifically:
 Some establishments may incur minor transition costs—According to a USDA
official, the transition from state to federal inspection usually requires minimal
changes that could entail some costs. For example, facilities may need to
change their product labels or may need to revise their food safety procedures
to include more product sampling. He also stated that some establishments that
have transitioned from state to federal inspection, especially older
establishments, have had to upgrade their facilities to meet requirements.
According to a department official, close to half of Arizona’s state-inspected
noncustom-exempt establishments are at least 15 years old. However, because
Arizona has adopted the federal building requirements—such as keeping
establishments in good repair, using appropriate wall and floor materials to help
ensure a sanitary environment, and providing office space for inspectors—in its
administrative code, state inspectors should already be enforcing these
requirements.
Still, some establishments could incur facility modification costs. Three
establishments auditors spoke with believe the USDA will require costly
modifications before granting federal inspection, and department officials
believe this may be true of older rural facilities. Although it is difficult to know
what modifications the USDA would require, they might not be as extensive as
some believe. For example, the USDA’s last on-site review of Arizona’s meat
and poultry inspection program did not result in any findings related to building
requirements. The review was conducted in July 2009, and the USDA inspected
16 state-inspected meat and poultry plants, including three rural plants and
seven plants that were at least 15 years old. Further, according to the USDA
official, most plants do not find transition costs to be prohibitive. An owner of an
Arizona establishment, an urban processor that recently changed to federal
inspection, also stated that although there were costs to make the transition, he
did not find the costs to be prohibitive.
 Some establishments may pay more overtime fees, but use of overtime not
widespread—The USDA charges slaughter and processing plants for
inspection costs for more than 8 hours per day or more than 40 hours in any
workweek. The hourly overtime rate for the USDA was $58.93 in fiscal year
2008.1 In contrast, Arizona only charges overtime fees to slaughtering plants
(processing plants are exempt) and has a much lower overtime rate—$19.40
per hour as of December 2009. However, using overtime has not been
1 In its Fiscal Year 2011 Budget Summary and Annual Performance Plan, the USDA proposed adding two new meat and
poultry inspection user fees. One proposed user fee would be collected from plants that have sample failures or require
additional inspection activities because of a pattern of regulatory noncompliance. The other proposed user fee would be
for a facility’s application and annual renewal activities in order to cover the increased costs above and beyond basic
inspection services provided to meat and poultry establishments. The USDA estimated collections from the new fees
would total $4 million and $8.6 million nation-wide, respectively. The USDA planned to submit legislative proposals that
would permit the new fees.
Office of the Auditor General
page 23
Arizona has adopted
federal building
requirements for meat
and poultry
establishments.
widespread at state-inspected slaughtering plants. In fiscal years 2008 and
2009, the Department charged only three establishments for overtime. The total
fees for the 2 years were just over $600, representing approximately 36 hours of
overtime at the Department’s rate of $17.05 per hour for those years. Auditors
were unable to estimate the extent to which state-inspected processing plants
work overtime because the Department does not track this information, although
several plants appear to have overtime hours based on a review of plants’
operating schedules. Thus, it is unknown how many Arizona processors would
work overtime under federal inspection and, therefore, have to pay the federal
overtime rate.
 Some establishments are concerned they may not receive the same degree of
individualized service, but the USDA has taken steps to improve its outreach—
Some owners of state-inspected meat and poultry plants who auditors spoke
with said that state meat inspectors might provide owners with more opportunity
to receive individualized attention, education, and assistance to navigate
regulation than federal inspectors do.1 Auditors heard from some state-inspected
establishment owners that state inspectors were responsive to their
needs and who thought that federal inspectors might be less helpful. Two
owners who had experience with both state and federal inspection said that
state inspectors were more helpful with some aspects of regulation, such as
approving new labels. Additionally, one owner of a state-inspected plant
speculated that USDA inspectors might spend more time reviewing paperwork
and be less concerned than state inspectors with ensuring that a wholesome
product is made. However, another owner of a rural plant that has been under
both state and federal inspection told auditors that USDA inspectors are
respectful, knowledgeable about meat and poultry regulations, and provided a
better quality of inspection.
The USDA has heard similar complaints from small and very small
establishments and has taken several steps to improve its outreach to these
establishments. Specifically, in 2008, the USDA started a program whose
primary purpose is to provide small and very small establishments under both
state and federal inspection with assistance in complying with regulations. This
program publishes newsletters, conducts webinars, and provides guidance
documents. Additionally, the USDA has an online question-and-answer
knowledge base called “Ask Karen” that contains information pertinent to the
safe preparation of meat, poultry, and egg products. One USDA-inspected meat
processor in Arizona told auditors that it takes “Ask Karen” about a day to
respond to his questions. Finally, in December 2009, the USDA launched a small
plant help-desk to provide regulatory assistance for operators of small and very
small meat and poultry plants.
1 Throughout the course of the audit, auditors interviewed representatives from ten state-inspected and four federally
inspected slaughter and/or processing establishments. The ten state-inspected establishments included seven urban
and three rural facilities, and included four facilities a department official identified as being over 25 years old. During the
interviews, auditors discussed the state inspection program and the possibility of transferring the program to the USDA
or raising user fees.
State of Arizona
page 24
In 2008, the USDA
started a program to
help small
establishments comply
with regulations.
The Department believes that some state-inspected meat and poultry
establishments, especially those located in rural areas, would have difficulty
transitioning to federal inspection. It is possible that some of Arizona’s state-inspected
plants would not apply for federal inspection and do only custom-exempt
work or close down. When New Mexico transitioned to federal inspection in 2007, 26
of the 31 state-inspected plants applied for and were granted federal inspection,
according to a USDA official.1 Of the plants that received federal inspection, most of
them were in rural areas. New Mexico officials told auditors that the establishments
that did not make the transition did not do so because of financial considerations and
because the owners did not want to work under federal inspection.
The Department’s meat and poultry program budget is limiting the amount of
inspection it can provide and is causing some plants to seek federal inspection.
Specifically, department officials told auditors that, because of budget constraints, as
of October 2009, the Department has had to deny requests from 27 establishments
that had requested state inspection or additional inspection days in the previous 5
years. One establishment owner who had been denied state inspection in the past
told auditors that he was applying for federal inspection at a new rural facility because
he did not think the State could offer him inspection and because he planned to sell
his product in interstate commerce. Additionally, in October 2009, the Department
stopped providing inspection on Saturdays because of budget constraints. As of
September 2009, eight state-inspected processing plants had been scheduled to
receive Saturday inspection. One of these plants has since obtained federal
inspection for Saturdays.
Alternatively, State could increase fees to cover costs
If the Legislature decides to retain the state meat and poultry inspection program, the
meat and poultry industry should pay for the regulatory costs because, without a
state meat and poultry inspection program, the federal government would conduct
the safety inspections at no cost to the State. Having both state and federal meat and
poultry inspection programs in Arizona primarily benefits the industry, and not the
State, by allowing industry members to choose between two regulators. As
discussed in Finding 1 (see pages 7 through 16), the parties that benefit from a
government program should pay the costs. If the state inspection program is
retained, the Department should follow an orderly process, such as the one
suggested in Finding 1, to develop a proposal for fees that would cover the state
inspection program’s costs. This process should include assessing the program’s
efficiency to minimize costs where possible; ensuring it has a way to accurately track
program costs, including testing performed at the State Agricultural Laboratory;
developing an equitable method to determine fees for different types of industry
members based on the work required to regulate each type such as meat and
poultry slaughterers or processers; considering the effect fee increases may have on
1 Of the 26 plants that were granted federal inspection, the USDA official noted that five of them later decided to operate
as custom-exempt.
Office of the Auditor General
page 25
The Department has
had to deny inspection
requests because of
budget constraints.
different establishment types; obtaining stakeholders’ input in proposing new fees;
and, lastly, proposing fee changes for the Legislature to consider. After receiving the
Department’s proposal, the Legislature should consider modifying statute to raise
existing fees or authorize the Department to create additional fees. According to
department officials, industry members are generally not opposed to paying higher
fees as long the monies are used for the program and not transferred to the State
General Fund.
However, because there are only 34 state-inspected establishments (excluding
custom-exempt establishments), licensing fees would need to increase significantly
to cover the meat and poultry inspection program costs. Statute requires meat and
poultry establishments to pay between $5 and $80 in licensing fees, although in fiscal
years 2009 and 2010 fees were between $35 and $150 as authorized by legislation.1
Similarly, the three other western states—Montana, Utah, and Wyoming—that have
state meat and poultry inspection programs also charge relatively low fees. Licensing
fees in these states range from $25 to $150. Based on the program’s fiscal year 2009
State General Fund appropriation, the 34 state-inspected establishments would
potentially need to pay more than $10,000 on average to cover the program’s costs,
which could place a burden on the establishments.2 Because fees would need to
increase significantly to cover costs, the Department might recommend phasing in
the changes. Still, increasing user fees to fully fund the meat and poultry inspection
program may result in some state-inspected establishments changing to federal
inspection to avoid paying higher fees.
The Department’s options for reducing program costs to minimize the impact on the
industry are limited. Specifically, state cooperative meat and poultry program
inspectors must perform inspection activities that are at least equal to those adopted
by the USDA, including providing adequate inspection coverage on days
establishments produce products. Therefore, the State could not reduce the
frequency of its meat and poultry inspections for cost savings without jeopardizing its
“at least equal to” status. States that fail to administer programs at least equal to the
federal program can be designated, meaning the USDA will take over all meat and
poultry inspections.
Recommendations:
2.1. The Legislature should consider eliminating the state meat and poultry
inspection program and transferring inspection responsibilities to the USDA.
2.2. If the Legislature decides to retain the state meat and poultry inspection
program, the Department should propose new fees to the Legislature to fund
1 Laws 2008, Ch. 291, §12, and Laws 2009, 4th S.S., Ch. 3, §23, authorized the Department to increase fees for fiscal years
2009 and 2010. On September 1, 2008, the Department raised its licensing fees for meat and poultry establishments from
between $5 and $80 to between $35 and $150.
2 The exact amount required would depend on how costs were allocated between commercial slaughter, commercial
processing, and custom-exempt establishments, each of which requires a different level of regulation.
State of Arizona
page 26
Fees to cover program
costs could place a
burden on
establishments.
the cost of the program. In developing the fees, the Department should do the
following:
a. Develop equitable fees that address different types of industry members
based on the work required to regulate each member such as meat and
poultry slaughterers and processors;
b. Ensure that it has an adequate process for tracking cost data for the meat
and poultry inspection program, including meat and poultry product testing
at the State Agricultural Lab;
c. Evaluate the state meat and poultry inspection program’s efficiency to
ensure that program costs are not higher than is necessary to complete the
work; and
d. Consider the effect fee increases may have on different establishment
types and obtain their input in proposing new fees. Because proposed fees
would be significantly higher than current fees, the Department might
recommend gradually increasing fees.
2.3. After receiving the Department’s proposal, the Legislature should consider
modifying statute to raise existing fees or authorize the Department to create
additional fees.
Office of the Auditor General
page 27
State of Arizona
page 28
Department helps to ensure egg safety and
quality
The Department of Agriculture’s (Department) egg inspection program appears to
adequately help ensure egg safety and quality in Arizona. Eggs are one of the foods
most commonly linked to foodborne illness in the U.S. The Department’s egg
inspection program, which the industry funds, helps maintain safe and high-quality
eggs by enforcing safety and quality regulations that are in line with model egg
regulations. The U.S. Department of Agriculture (USDA) and the U.S. Food and Drug
Administration (FDA) also regulate egg safety and quality to help reduce foodborne
illness from eggs.
Eggs commonly linked to foodborne illness
Eggs are one of the foods most commonly linked to foodborne illness outbreaks. In
2008, the Center for Science in the Public Interest (Center) reported that, nation-wide,
eggs were linked to 72 outbreaks and 1,747 illnesses between 1990 and 2006, and
egg dishes such as egg salad and French toast were
linked to an additional 279 outbreaks and 9,396
illnesses.1 The Center also reported that the number of
egg-related outbreaks has declined in recent years. The
primary contaminant in egg-related illnesses is
Salmonella Enteritidis (see textbox). According to
experts, the industry and consumers are responsible for
reducing the number of foodborne outbreaks
associated with eggs. Specifically, industry can reduce
the contamination risk by adopting measures to prevent
Salmonella Enteritidis from infecting laying hens during
production and by properly washing, handling, and
refrigerating eggs during processing, transportation,
1 The Center for Science in the Public Interest is a nonprofit organization that works to improve the public’s health
through its work on nutrition and food safety issues. Center for Science in the Public Interest. (2008). Outbreak
alert 2008: Closing the gaps in our federal food-safety net. Retrieved September 21, 2009, from
http://www.cspinet.org/new/pdf/outbreak_alert_2008_report_final.pdf
Office of the Auditor General
page 29
FINDING 3
Salmonella Enteritidis is a bacterium that
can cause illness in humans. Shell eggs are
a primary source of human infections. Shell
eggs can be contaminated through
unsanitary environmental conditions after
being laid or through ovarian tissue in
infected hens before the shell is formed.
Source: Auditor General staff analysis of information
from the USDA, the FDA, the National Egg
Quality School, and the United Nation’s Food
and Agriculture Organization.
and storage. Consumers also can reduce the risk by storing eggs at the proper
temperature and cooking them thoroughly.
Department inspects and grades eggs
The Department maintains an egg inspection program to help ensure the safety and
quality of eggs produced and sold in Arizona. Program staff inspect eggs and egg
products to enforce compliance with state laws and regulations, and perform grading
services on the USDA’s behalf at the State’s only commercial egg producer. The egg
inspection program is funded entirely by industry fees. As of December 2009, the
program had eight inspectors and, as of February 2010, a fiscal year 2010 budget of
$866,700. Although the USDA licenses most of the inspectors to provide the grading
services, three inspectors perform state inspections while five inspectors provide
USDA grading services.1 Specifically:
 State inspection—Program staff inspect eggs and egg products at laying
facilities, wholesalers, and retail stores to ensure compliance with state laws and
regulations that address safety and quality. These laws and regulations are in
line with model egg regulations and include refrigeration, expiration dating,
grading, and sanitation requirements (see textbox).2
1 One state egg inspector is a trainee and is not yet licensed by the USDA.
2 The model egg regulations are written by the National Egg Regulatory Officials, whose membership consists of state
agriculture department officials and whose purpose is to promote uniform standards for quality, safety, labeling, and
handling of shell eggs and egg products that ensure a safe, fresh, and truthfully marketed egg supply.
State of Arizona
page 30
Egg laws and regulations enforced by program inspectors
 Refrigeration—According to food safety experts, proper storage temperatures can inhibit bacterial growth in eggs.
State law requires eggs to be stored at a temperature no higher than 45°F and egg products at a temperature no higher
than 0°F.
 Expiration dating—It is illegal to sell eggs marked grade AA or A past their expiration date in Arizona. According to
food safety experts, consuming eggs soon after they are laid can help reduce opportunities for bacteria to grow in
contaminated eggs. Arizona requires all eggs sold in the State to have an expiration date of 24 days after being
candled, which is one of the shortest expiration periods in the nation.
 Egg quality—The State has adopted federal standards, grades, and weight classes that set quality requirements for
grade AA, A, and B eggs. These quality standards also entail safety aspects, such as ensuring that eggs are clean from
bacteria and do not have excessive cracks that could allow bacteria to enter.
 Sanitation—In 2009, Arizona amended its administrative rules to require all egg producers in the State to meet the
USDA’s facility and sanitary operation requirements. These requirements help ensure eggs are properly washed and
sanitized during egg grading and packing.
Source: Auditor General staff analysis of Arizona Revised Statutes §§3-701, 3-715, and 3-727; Arizona Administrative Code R3-2-901 through
903 and 906 through 908; World Health Organization Food and Agriculture Organization of the United Nations. (2002). Risk
assessments of Salmonella in eggs and broiler chicken: Interpretative summary (Microbiological Risk Assessment Series 1). Rome,
Italy: Author.
Industry fees pay for the
egg inspection program.
The Department licenses companies that sell eggs wholesale in the State and
charges them a $25 annual licensing fee and a quarterly assessment fee based on
the number of eggs or weight of egg products sold to retailers. The Department
issued 82 licenses during fiscal year 2009.
During the inspections, inspectors verify
storage temperatures and check expiration
dates for both eggs and egg products, and
visually examine, or candle, a sample of
eggs to verify the egg grade (see Photo 1).
Statute requires inspectors to retain, or
prohibit from being sold, all eggs and egg
products that do not comply with state
requirements. Although inspection
frequencies are not specified in statute or
rule, the Department has set goals to inspect
large wholesalers (including the State’s only
commercial egg producer) once per month,
small wholesalers once per quarter, and retail
stores from every year to once every 3 years
depending on how many eggs they sell.
According to department data, state
inspectors performed 396 inspections at
wholesalers (about 90 percent of the
Department’s goal for wholesale egg
inspections) and 359 inspections at retail
stores in fiscal year 2009.
 USDA grading services—The USDA maintains a cooperative agreement with
the Department to provide grading services at industry members’ request, who
pay an hourly rate to cover the costs of these services and a volume charge
based on the number of graded cases of eggs. The Department collects the
volume charges from industry members and passes them on to the USDA. In
addition to grading eggs, state inspectors monitor plant sanitation, processing
and storage temperatures, and handling procedures. The Department provides
daily grading services at three egg laying facilities. Only eggs graded under a
USDA grader’s supervision have the USDA grade shield.
Although this audit did not focus on program effectiveness, information obtained
during the audit suggests that state laws department staff enforce adequately
protect the public from unsafe eggs. Specifically, state laws are in line with model
egg regulations and, in the case of expiration dates, exceed other states’ practices.
In addition, according to department data, the Department achieved about 90
percent of its goal for wholesale egg inspections in fiscal year 2009 and retained
eggs that did not meet standards to prevent them from sale to the public.
Office of the Auditor General
page 31
.
Photo 1: Egg Candling
Source: Used with permission of Hickman Family Farms.
Federal regulations also address egg safety
The federal government also plays an egg quality and safety role through regulations
and participation in a federal-state-industry cooperative program. Under the 1970
Egg Products Inspection Act (Act), the USDA provides continuous inspection of egg
products, such as liquid or frozen eggs. Similarly to regulating meat slaughtering
establishments, the Act requires mandatory continuous inspection by USDA
inspectors throughout the production of egg products. The Act also helps ensure
safety by requiring these products to be pasteurized. Arizona has one USDA-inspected
egg products plant. In addition, the USDA administers the National Poultry
Improvement Plan, a cooperative federal-state-industry program that establishes
standards to evaluate poultry breeding stock and hatchery products to limit egg-transmitted
and hatchery-disseminated diseases such as Salmonella Enteritidis. The
Department and the State’s only commercial egg producer both participate in this
program.
The FDA is also responsible for egg safety and is working to solve the problem of
Salmonella Enteritidis in eggs. In 2009, the FDA issued a rule that requires egg
producers to implement measures to prevent contamination and potential illness
from Salmonella Enteritidis. Specifically, beginning July 9, 2010, egg producers will be
required to have and implement a prevention plan that addresses farm and
henhouse security, rodent control, and Salmonella Enteritidis testing. This rule allows
for state and/or local officials to help implement it by carrying out inspections and
using prescribed administrative remedies, and the FDA plans to provide further
guidance to states and localities on enforcing this rule. According to a company
official from Arizona’s only commercial egg producer, he does not anticipate that his
company will have to change many of its practices to come into compliance with the
new rule.
This finding contains no recommendations.
State of Arizona
page 32
Department can further promote produce safety
Although government and the agriculture industry have increased efforts to
encourage produce safety, the Department of Agriculture (Department) can further
promote produce safety in Arizona. Produce safety concerns have heightened in the
U.S. as significant human illness outbreaks have affected thousands of people. The
industry and government have taken steps to address the issue of produce safety by
encouraging food safety audits, and providing guidelines for safe growing and
handling practices, but participation is voluntary, and neither the State nor the federal
government have regulatory requirements for food safety that producers,
processors, and shippers must follow. The Department’s emphasis has traditionally
been on quality standards (such as size, color, and shape) rather than produce
safety. Although the Department has shifted some of its focus toward produce safety,
auditors identified an additional step the Department could take. Specifically, it could
target some of its existing agricultural federal grant dollars to help companies
prepare for and receive food safety audits.
Produce safety is a national concern
An increase in the number of foodborne illness outbreaks associated with fresh fruits
and vegetables has raised national concern for produce safety in recent years. For
example, since 2006 there have been large national outbreaks tied to spinach,
peppers, and peanuts (see textbox, page 34). The 2008 outbreak of Salmonella in
peppers was one of the largest foodborne illness outbreaks reported in the last 10
years, affecting over 1,400 people in 43 states, the District of Columbia, and Canada.
Produce is particularly susceptible to contamination because it is grown in a natural
environment. Further, risk of illness from produce consumption may be higher
because produce is often consumed raw, unlike animal products, which are
generally cooked or pasteurized to kill bacteria. According to the Center for Science
in the Public Interest, produce was linked to 35,060 foodborne illnesses between
1990 and 2006, which is 21 percent of illnesses linked to a specific food source
during that time.1
1 Center for Science in the Public Interest. (2008). Outbreak alert 2008: Closing the gaps in our federal food-safety net.
Retrieved September 21, 2009, from http://www.cspinet.org/new/pdf/outbreak_alert_2008_report_final.pdf
Office of the Auditor General
page 33
FINDING 4
Produce is susceptible
to contamination
because it is grown in a
natural environment.
Further, the U.S. Centers for Disease Control and Prevention (CDC) reported that the
most common foods linked to foodborne illness outbreaks reported during 2006,
after poultry, were leafy vegetables and fruits/nuts.1
Although the federal government does not require produce growers to implement
preventative food safety measures, federal agencies have taken steps to address
produce safety concerns. For example:
 U.S. Food and Drug Administration (FDA)—The FDA has issued guidance for
safely growing and handling produce to reduce microbial contamination. In
1998, it published its Guide to Minimize Microbial Food Safety Hazards for Fresh
Fruits and Vegetables, and in 2009, it issued commodity-specific draft food
safety guidance for tomatoes, melons, and leafy green products, the three types
of produce more often associated with foodborne illness. The guidance
suggests minimizing potential microbial contamination in various ways such as
ensuring that the quality of water used for produce’s final rinse is consistent with
EPA requirements for drinking water and minimizing opportunities for field
contamination by providing accessible toilets and hand-washing facilities for
workers. However, the FDA typically does not inspect farms and does not
enforce compliance with recommended practices in these guidance
documents.
 U.S. Department of Agriculture (USDA)—In 1999, the USDA’s Agricultural
Marketing Service introduced a program for voluntary produce safety audits
known as the Good Agricultural Practices and Good Handling Practices
(GAP/GHP) Audit Verification Program. These audits verify adherence to the
recommendations made in the FDA’s Guide to Minimize Microbial Food Safety
1 Surveillance for foodborne disease outbreaks—United States, 2006. (2009, June 12). Morbidity and Mortality Weekly Report, 58(22), 609-
636. Retrieved September 30, 2009, from http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5822a1.htm
State of Arizona
page 34
Major foodborne illness outbreaks from produce
Spinach—In 2006, 205 illnesses and 3 deaths were associated with
fresh bagged spinach from California that was contaminated with E.
coli O157:H7.
Jalapeno and serrano peppers—In 2008, over 1,400 illnesses from
Salmonella-contaminated peppers produced in Mexico were reported
in what was first thought to be a tomato-related outbreak.
Peanuts—In 2008 and 2009, Salmonella-contaminated peanuts from
Georgia caused over 500 illnesses and may have contributed to as
many as 9 deaths.
Source: Auditor General staff summary of information from the CDC, the FDA, and
Trust for America’s Health.
The FDA has issued
commodity-specific
guidance for tomatoes,
melons, and leafy
greens.
Hazards for Fresh Fruits and Vegetables. The GAP section of the audit examines
farm practices such as examining the farm sewage system for leaks to prevent
produce contamination. The GHP section examines handling practices at
packing facilities, storage facilities, and wholesale distribution centers. For
example, an operation should prohibit workers with infectious diseases from
handling fresh produce. The USDA licenses state inspectors to conduct the
audits, which are valid for 1 year. The companies that request the audits pay a
federally established rate of $92 per hour, including inspectors’ travel time, for
both the initial audit and any follow-up visits. According to a department
inspector who conducts these audits, the audits usually last between 2 and 7
hours, with between 1 and 9 hours of travel time.
In the absence of federal regulations, the food and agriculture industry has also taken
steps to ensure produce safety. For example:
 Third-party audits—Many retailers require produce suppliers to follow specific
quality and safety standards and to undergo third-party audits to ensure
compliance. These standards are often different, and suppliers who sell to
multiple retailers may need to undergo multiple audits under different standards.
For example, some standards require fields to be set a certain distance from
concentrated animal feeding operations, a potential source of contamination,
while others do not. In addition, although these audits help ensure safe
practices, they are required only by the industry and are not monitored or
required by government.
In addition, industry members and state agencies have worked together to help
ensure produce safety. For example:
 Statutes and marketing agreements—Members of the agriculture industry in
some states, including Arizona, have worked with their respective states to pass
statutes or develop marketing agreements for specific commodities. For
example, in Florida, the tomato industry worked with the State to develop a
mandatory tomato safety program. Florida statute requires the Florida
Department of Agriculture and Consumer Services to conduct tomato safety
inspections at farms, greenhouses, and packing houses to ensure compliance
with safety practices in Florida’s tomato best practices manual. Industry fees
pay for the inspection costs as well as research grants to provide scientific
information on tomatoes. In California and Arizona, the leafy greens industry has
worked with state agencies to implement marketing agreements for leafy green
products. Although participation in these agreements is voluntary, those who
agree to participate must follow specific safety standards and undergo annual
audits to ensure compliance (see textbox, page 36). As of November 2009, 35
Arizona companies have signed the agreement, representing 96 percent of leafy
greens grown in Arizona according to the marketing agreement Web site. The
USDA is considering an industry proposal to create a national leafy greens
Office of the Auditor General
page 35
GAP/GHP audits
examine farm and
handling practices for
preventing produce
contamination.
marketing agreement and held hearings for public comment in September and
October 2009. The USDA accepted comment until January 27, 2010.
Despite these efforts, some industry members have called for federal produce safety
regulations to create uniform national standards. Some industry representatives have
published documents and presented testimonials to the USDA and FDA concerning
the need for national produce standards. The Food Safety Enhancement Act of 2009
(Act) was introduced in Congress and, if it passes, will require the FDA to establish
science-based food safety standards for growing, harvesting, packing, sorting,
transporting, and holding fruits and vegetables that the FDA determines are
necessary to reduce health risks. The Act would require the FDA to update its
guidance for minimizing microbial food safety hazards for fresh fruits and vegetables.
As of January 6, 2010, the bill was with the U.S. Senate. In addition, in 2009, the FDA
reported that within the next 2 years it expects to finalize its commodity-specific food
safety guidance for tomatoes, melons, and leafy greens and require compliance with
them.
Department can do more to promote produce safety
The Department has shifted some of its focus from produce quality to produce safety
but can take an additional step to promote produce safety audits. In 2009, the
State of Arizona
page 36
Arizona Leafy Green Products Shipper Marketing Agreement
In September 2007, the Department and the State’s leafy green products industry created the Arizona Leafy Green
Products Shipper Marketing Agreement. Arizona’s agreement was patterned after a similar agreement in California
following the 2006 E. coli outbreak in bagged spinach from California. Participation in the agreement is voluntary.
However, shippers who agree to participate and their suppliers must follow mandatory safety standards for growing
and handling leafy green products and are subject to annual audits that check compliance with the standards. The
standards cover worker hygiene, water quality, field use, and animal control. For example:
 Untreated manure must be kept at a specific distance from water wells;
 Land adjacent to fields must be free from septic leaks or other risks; and
 There must be no evidence of animal fecal material in the fields.
The agreement is funded by an assessment on products shipped by members and is run by a committee of industry
members. This committee contracts with California’s Department of Food and Agriculture, the agency that conducts
the audits for California’s agreement, to perform the Arizona audits. The committee also contracts with the Arizona
Department of Agriculture to provide administrative and legal services such as collecting the assessment on
products shipped by members and coordinating public outreach sessions. As of November 2009, 35 companies
had signed the Arizona agreement. Collectively, these companies ship and sell more than 85 percent of leafy green
products nationally and in Canada from November through March.
Department began retraining its produce quality inspectors to perform produce
safety audits and has begun providing industry with information about the
GAP/GHP audit program. In addition to these efforts, the Department should initiate
projects or encourage applicants for federal grant monies the Department awards
to submit proposals for projects that help small companies overcome obstacles to
receiving food safety audits.
Arizona produces significant amounts of fruits and vegetables—
Arizona grows a significant amount of produce, especially leafy greens. In 2008,
Arizona ranked third in the nation for the production of fresh market vegetables
and melons, producing 7.4 percent of the nation’s total production, compared to
9.5 percent by Florida and 49.1 percent by California (see Figure 3). In addition,
Arizona is the second largest producer of lettuce in the nation, producing about
22 percent of the national total, compared to California, which produces the other
78 percent.
Office of the Auditor General
page 37
California 49.1%
Florida 9.5%
Arizona 7.4%
Georgia 4.9%
New York 3.6%
Other states
25.5%
Figure 3: Percentage of U.S. Fresh Market Vegetable and Melon
Production by State for 24 Selected Crops1
Calendar Year 2008 Estimates
1 The 24 selected crops are artichokes, asparagus, snap beans, broccoli, cabbage, cantaloupes, carrots,
cauliflower, celery, sweet corn, cucumbers, garlic, honeydews, lettuce (head, leaf, and romaine), onions, bell
peppers, chili peppers, pumpkins, spinach, squash, tomatoes, and watermelons. The three largest crops, in
terms of production, are onions, head lettuce, and watermelons, which combined account for 37 percent of the
total production.
Source: Auditor General staff analysis of USDA data on fresh market vegetable and melon production.
United States Department of Agriculture, National Agricultural Statistics Service. (2009). Vegetables 2008 summary.
Retrieved October 21, 2009, from http://usda.mannlib.cornell.edu/usda/current/VegeSumm/VegeSumm-01-28-
2009.pdf
Department has shifted some focus to produce safety—Given the
importance of produce to the State’s agriculture industry, the Department has
taken some steps to shift its focus from produce quality to produce safety. Since
1929, the Department has enforced state product quality standards for each
commodity grown or marketed in Arizona through its Citrus, Fruit and Vegetable
Standardization Program. The program also manages the federal-state inspection
program that provides federal inspection services, such as the GAP/GHP audits,
and enforces U.S. import requirements at the international border between Arizona
and Mexico. Historically, the standardization program has licensed produce
packers, dealers, and shippers and has inspected produce to verify quality
standards such as color, shape, decay, size, maturity, and labeling. Although
quality standards are important, industry members and department officials have
said that the program has become somewhat obsolete as the industry’s quality
standards for some commodities now exceed state standards. Consequently,
Arizona’s produce industry has worked with the Department to shift its focus from
quality to promoting food safety standards. Specifically:
 Discontinuing quality inspections—The Citrus, Fruit and Vegetable Advisory
Council voted to discontinue standardization program inspections to enforce
state quality standards beginning in August 2009. The program will continue
to license packers, dealers, and shippers and enforce labeling requirements.
 Training food safety auditors—Using monies from produce industry
assessments, the Department has begun training more of its federal-state
inspectors and all of the former standardization inspectors to perform the food
safety focused audits such as GAP/GHP audits as well as audits for the
Arizona leafy greens marketing agreement. According to the Department, in
2009, only two of the Department’s federal-state inspectors were certified by
the USDA to perform GAP/GHP audits. However, with the shift from
standardization to safety, an additional nine inspectors are in the process of
becoming certified by the USDA to perform GAP/GHP audits, and four
inspectors are being trained to perform the leafy greens audits. The industry
pays for both GAP/GHP and leafy greens audits.
 Promoting GAP/GHP audits—In conjunction with training additional
inspectors to perform GAP/GHP audits, the Department has begun promoting
these audits among packers, dealers, and shippers licensed by the
Department. According to the Department, the GAP/GHP inspectors have
been distributing flyers to inform licensees about the availability and benefits
of safety-related activities such as GAP/GHP certification. Even so, as of
November 2009, only 11 Arizona companies received and passed GAP/GHP
audits. By comparison, the USDA’s National Agricultural Statistics Service
estimates that there are 241 commercial vegetable and melon farms in
Arizona, and there were 525 licensed produce dealers, packers, and shippers
in the State in fiscal year 2009.
State of Arizona
page 38
Additional department
inspectors are
becoming certified to
perform GAP/GHP
audits.
Department could further promote produce safety audits—In addition
to the steps the Department has already taken related to produce safety, the
Department could use some of its federal grant monies such as the Specialty Crop
Block Grant to assist companies that may need assistance preparing for
GAP/GHP audits. Since 2008, the USDA’s Agricultural Marketing Service has
offered all 50 states grant monies for enhancing the competitiveness of specialty
crops, including fruits, vegetables, tree nuts, and other nongrain crops. Grant
monies can be used for projects such as specialty crop research, increasing
nutrition knowledge about specialty crops, assisting entities in developing Good
Agricultural Practices, and in cost-sharing arrangements for safety audits. In fiscal
year 2009, the Department received over $1.1 million of this Specialty Crop Block
Grant money, which it awarded to 18 agricultural research projects designed to
enhance the competitiveness of Arizona specialty crops.
Although the Department awards Specialty Crop Block Grant monies to projects
based on priorities that include food safety, few funded projects are focused
directly on produce safety. The Department receives applications for these monies
from universities, industry associations, and other entities. It makes awards based
on eight priorities suggested by stakeholders, including food safety, research,
education, and public outreach. The Department awarded monies to 18 projects
in fiscal year 2009. However, according to a department official, few applications
have been received that focus directly on produce safety. For example, in fiscal
year 2009, only 3 of the 38 applications the Department received focused directly
on food safety, and none of these 3 focused on food safety audits. Of the 3 food
safety-focused applications, the Department funded one project that involved
educating youth in Yuma County—where a high volume of leafy greens are
produced—about the importance of food safety and their role in keeping food safe
by staying out of fields and off of canal banks. The other two were disqualified, one
because it did not meet application requirements and the other because of
duplicate funding. The Department also funded seven additional projects that
focused on pesticide or fertilizer use, which could also affect food safety by helping
to reduce chemical residue on foods.
The Department could take a more proactive approach by initiating produce safety
projects or encouraging applicants to submit proposals focused on projects that
help companies overcome obstacles to food safety audits. Department officials
agreed that targeting monies toward produce safety audits could benefit specialty
crops in Arizona. These types of projects are considered eligible projects by the
grant specifications and have also been performed in some other states. For
example:
 Consultation—Grant monies could be used for projects that provide
consultation or training that prepares growers and handlers for produce safety
audits. Small companies that cannot afford to hire an in-house produce safety
Office of the Auditor General
page 39
The Department could
use federal grant
monies to encourage
food safety audits.
manager may have difficulty meeting audit requirements such as having
standard operating procedures that describes how the company will help
keep food safe. Some states have used federal grant monies to provide audit
preparation assistance to these companies. For example, in fiscal year 2009,
the Texas Department of Agriculture used Specialty Crop Block Grant monies
to fund a vegetable specialist at Texas A&M University to provide free
GAP/GHP consultation to help Texas farms and greenhouses develop
standard operating procedures. In addition, the New Jersey Department of
Agriculture provides monies from other grants to a similar program at Rutgers
University, which offers safety audit assistance including training, standard
operating procedure development, and mock audits.
 Cost share—Grant monies could be used in a cost-share program to promote
produce safety audits as well. Because the cost of third-party safety audits
can be prohibitive, especially to small farmers, some states’ departments of
agriculture have started cost-share programs to help growers and handlers in
their state receive GAP/GHP audits. For example, the Pennsylvania
Department of Agriculture’s cost-share program awards Pennsylvania
growers and handlers who pass a GAP/GHP audit with $400 of Specialty Crop
Block Grant monies to help offset the audit’s costs. In addition, Connecticut
used grant monies to implement a program to reimburse 50 percent of audit
costs up to $500 to become USDA GAP certified. Also, the Maryland
Department of Agriculture used grant monies in a GAP/GHP audit cost-share
program and, according to a Maryland department official, has reimbursed
ten applicants $400 each. Further, according to the Texas Department of
Agriculture, it approved one Specialty Crop Block Grant project in 2009 that
offers a one-time, $750 cost-share award to companies that pass a third-party
food safety audit, which could include GAP/GHP audits.
The Department should consider initiating projects or encouraging grant applicants
to submit applications for projects that are focused on food safety audits. However,
in providing these monies for projects of any type, including food safety, the
Department should do so on the basis of the relative costs and benefits involved.
Recommendation:
4.1. The Department should consider initiating projects using available grant monies
or encouraging applicants for grant monies to submit proposals focused on
produce safety such as audit preparation or cost-share projects. The
Department should do this on the basis of relative costs and benefits involved.
State of Arizona
page 40
Department should better promote preventative
food defense measures
The Department of Agriculture (Department) should do more to promote preventative
security measures at facilities it regulates. Since the September 11, 2001, terrorist
attacks (9/11), a heightened concern exists that a terrorist could intentionally
contaminate the United States food supply as a way to threaten public health or hurt
the agricultural economy. Two of Arizona’s most valuable agricultural commodities,
milk and leafy greens, are among the foods most vulnerable to intentional
contamination. Government oversight of security, however, is limited largely to issuing
guidelines and noting areas needing improvement in some inspections where food
defense issues may overlap with food safety issues. The extent to which
establishments have adopted these guidelines varies, and larger establishments
have apparently taken more aggressive actions than smaller establishments. Steps
the Department could take to promote security measures include providing facilities
that it regulates with a voluntary self-assessment tool, increasing food defense
awareness during inspections, promoting more food defense reviews as part of
voluntary audits, and fostering greater collaboration between the many agencies
involved in food safety and food defense.
Intentional contamination of food is a risk
Following 9/11, government officials and the public have expressed concern that the
U.S. food supply could be vulnerable to acts of intentional contamination. Although
the threat of intentional contamination is difficult to measure, food experts believe
vulnerabilities should be assessed because the potential consequences could be far
reaching. Arizona is a significant producer of some foods considered to be more
vulnerable, such as milk and leafy green vegetables.
Food defense is a national concern—Food defense refers to protecting food
products from intentional contamination. In October 2001, following 9/11, the
Office of the Auditor General
page 41
FINDING 5
The threat of intentional
contamination is hard to
measure, but
consequences could be
far reaching.
President added the agriculture and food industries to the list of critical
infrastructure systems needing protection from potential terrorist attacks.
According to the U.S. Department of Homeland Security, experts reason that,
given the vulnerability of food to major unintentional foodborne illness outbreaks,
individuals with malevolent aims could intentionally reproduce these outbreaks
with more severe consequences than unintentional ones.1 A 2005 study funded by
the National Center for Food Protection and Defense estimated that many U.S.
residents expected at least one terrorist attack involving deliberate chemical or
biological contamination of a common food product to occur in their lifetime.2
The threat of intentional contamination is difficult to measure, but experts believe
an incident is plausible and could be far reaching. Thus far, reported cases of
intentional contamination have been sporadic. In addition,
most reported cases have not occurred in agricultural
settings, but rather in retail outlets, homes, and workplaces,
and were typically performed using commonly available
household, agricultural, or industrial chemicals (see textbox).
However, experts believe the threat is plausible and that
vulnerabilities at any point in the food supply chain should be
considered, given the potential impact. For example,
terrorists or other individuals could introduce animal or plant
diseases to cause economic harm or generate fear. Persons
wishing to harm public health could use biological,
radiological, or chemical agents to contaminate food
products. The potential costs of intentional contamination
could include loss of life, destruction of crops and livestock,
healthcare expenses, lost wages, and less consumer
confidence in the safety of the food supply.
Arizona produces vulnerable products—Some food products, including
some types that Arizona produces, are more vulnerable than others to intentional
contamination. The FDA states that foods prepared in large batches, foods with a
short shelf life, foods that are easily accessed, and foods that are uniformly mixed
are more at risk for intentional contamination because they can affect a higher
number of people and are difficult to trace back.3 Specifically, the FDA considers
raw milk and fresh leaf and stem vegetables to be especially vulnerable to
intentional contamination. According to a food defense expert, Arizona may be
vulnerable to an intentional act of contamination because it produces a lot of dairy
products and fresh produce. Dairy products and lettuce are among the State’s
most valuable agricultural commodities. In 2008, Arizona ranked 12th in U.S.
1 United States Department of Homeland Security, Office of Inspector General. (2007). The Department of Homeland
Security’s role in food defense and critical infrastructure protection (OIG-07-33). Washington, D.C.: Author.
2 The National Center of Food Protection and Defense was launched as a United States Homeland Security Center of
Excellence in July 2004. It is a multidisciplinary and action-oriented research consortium that addresses the vulnerability
of the nation’s food system to attack through intentional contamination with biological and chemical agents.
3 Acheson, D.A. (2005, November). Equipping and educating the next generation of leaders in food protection and
defense. In Proceedings of the Institute of Food Technologists’ First Annual Food Protection & Defense Research
Conference, Atlanta, GA. Retrieved July 1, 2009, from https://www.ift.org/fooddefense/15-Acheson.pdf
State of Arizona
page 42
Examples of intentional contamination
 In 1984, members of a religious cult poisoned ten
Oregon salad bars with Salmonella, resulting in 751
individual cases of illness.
 In 1996, a disgruntled employee of a Texas hospital
willfully tainted snacks in a staff break room, which
caused illness in 12 people.
 In 2003, a Michigan supermarket employee infected 200
pounds of ground beef with an insecticide, causing
illness in 92 people.
Source: United States Department of Homeland Security, Office of
Inspector General. (2007). The Department of Homeland
Security’s ro

Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution.

Debra K. Davenport
Auditor General
Performance Audit
Department of
Agriculture—
Food Safety and Quality Assurance
Inspection Programs
Performance Audit Division
May • 2010
REPORT NO. 10-04
A REPORT
TO THE
ARIZONA LEGISLATURE
The is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Melanie M. Chesney, Director
Shan Hays, Manager and Contact Person
Jeremy Weber, Team Leader
Steven Meyeroff
Cheya Wilson
Representative Judy Burges, Chair Senator Thayer Verschoor, Vice Chair
Representative Tom Boone Senator John Huppenthal
Representative Cloves Campbell, Jr. Senator Richard Miranda
Representative Rich Crandall Senator Rebecca Rios
Representative Kyrsten Sinema Senator Bob Burns (ex efficio)
Representative Kirk Adams (ex efficio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
May 13, 2010
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Mr. Donald Butler, Director
Department of Agriculture
Transmitted herewith is a report of the Auditor General, a Performance Audit of the
Department of Agriculture—Food Safety and Quality Assurance Inspection Programs. This
report is in response to a November 3, 2009, resolution of the Joint Legislative Audit
Committee. The performance audit was conducted as part of the sunset review process
prescribed in Arizona Revised Statutes §41-2951 et seq. I am also transmitting within this
report a copy of the Report Highlights for this audit to provide a quick summary for your
convenience.
As outlined in its response, the Department of Agriculture agrees with most of the findings
and plans to implement all of the recommendations directed at it.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on May 14, 2010.
Sincerely,
Debbie Davenport
Auditor General
Attachment
costs, partly because licensing fees have
not increased for over 50 years except for
temporary increases in fiscal years 2009
and 2010.
The dairy industry in other states pays
more of the costs. In four of the ten states
surveyed, the industry pays the majority
of the inspection costs. In four of the
other six states surveyed, the industry
paid from 5 to 17 percent of the costs.
Arizona dairy industry fees have generally
contributed less than 1 percent of costs.
The Department regulates the safety of
milk and milk products by enforcing the
federal grade “A” pasteurized milk
ordinance, which the State has adopted.
This allows Arizona dairies to sell their
products in other states. The Department
inspects sanitation and other specific
processes and conditions at dairy farms
and processing plants, and tests samples
of milk and milk products.
The State General Fund pays for almost
all of the program’s $390,000 in annual
The USDA and the State each pay half of
the program’s costs, and transferring
meat and poultry inspection to the USDA
would save the State about $400,000 a
year. The State General Fund pays nearly
all of the State’s share of program costs
except a small amount from fees and
overtime inspection charges. If the
program is transferred, some
establishments may incur facility
modification costs, but it does not appear
that modifications should be extensive.
Industry costs for overtime inspections
could also increase because the federal
overtime rate is higher, but overtime use
appears to be limited.
As an alternative, the State could increase
fees so the industry covers the inspection
program’s costs. However, with only 34
state-inspected facilities, each could have
to pay an average of more than $10,000
per year to cover the inspection
program’s costs, which could place a
burden on the establishments.
The USDA has ultimate responsibility for
meat and poultry inspection. The USDA
must inspect any slaughter or meat
processing plant that sells meat and
poultry out of state. However, states may
enter into agreements with the USDA to
inspect establishments that do not sell in
interstate commerce.
Inspections, whether federal or state,
ensure that animals are disease-free,
facilities are clean and sanitary, and meat
and poultry products are wholesome and
properly labeled. In Arizona, 27
establishments are federally inspected,
and 34 are state inspected. However, the
federally inspected establishments
account for over 99 percent of all cattle
slaughtered in Arizona.
Many states do not have state inspection
programs—Twenty-three states, including
states that produce large amounts of red
meat like Colorado and Nebraska, do not
conduct state inspections. Only 4 of 13
western states, including Arizona, have
state inspection programs.
2010
May • Report No. 10–04
Department of
Agriculture—
Food Safety and Quality Assurance
Inspection Programs
Our Conclusion
The Department of
Agriculture (Department)
helps ensure the safety
and quality of Arizona’s
dairy products, meat and
poultry, eggs, and fresh
produce. Because the
dairy industry benefits from
the Department’s
oversight, the State should
share more costs—which
the State General Fund
bears almost entirely—with
the industry, as some other
states do. Similarly, the
Legislature should
consider transferring
responsibility for meat and
poultry inspections to the
U.S. Department of
Agriculture (USDA), who
would conduct these
inspections at no cost to
the State, or require the
industry to pay the costs of
operating a state program.
The Department should
also continue shifting its
produce program
emphasis from quality to
safety and take additional
actions to promote food
security.
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
Dairy industry should share in safety program
costs
Consider transferring meat and poultry
inspections to USDA
Better promotion of food defense
Promoting produce safety
Department of
Agriculture—
Food Safety and Quality Assurance
Inspection Programs
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
May 2010 • Report No. 10 – 04
page 2
Department helps ensure egg safety and quality
State inspectors inspect eggs and egg products at
laying facilities, wholesalers, and retail stores. Eggs
are a common source of foodborne illness
outbreaks caused by Salmonella Enteritidis.
The risk is reduced by properly handling, washing,
and refrigerating eggs during processing,
transportation, and storage.
The cost of inspections is covered by industry fees.
The frequency of wholesaler and retailer inspections
depends on the volume of eggs they sell.
Produce is particularly susceptible to contamination
because it is typically grown in a natural
environment. In addition, unlike animal products, it is
usually consumed raw rather than cooked.
The USDA introduced a program in 1999 to
promote voluntary produce safety audits, which the
industry pays for. These audits examine growing
and handling practices at farms, packing facilities,
and warehouses. In some states, the produce
industry has worked to develop marketing
agreements addressing produce safety. For
example, Arizona and California have voluntary leafy
green product agreements where participants agree
to specific safety standards and annual audits.
Historically, department inspections focused on
quality standards such as color, shape, and size.
However, the Department is focusing more on
promoting produce safety. It is training inspectors to
do USDA food safety audits and promoting the
audits.
The Department could use more of its federal grant
monies to fund projects to promote food safety
audits, such as helping small farmers prepare for
and receive audits.
Food defense refers to protecting food products
from intentional contamination. Although reported
cases are sporadic, experts believe the threat is
plausible and the effects could be far-reaching.
Although the USDA and U.S. Food and Drug
Administration have written federal food defense
guidelines, these guidelines are voluntary.
Department meat and poultry inspectors look for
potential security vulnerabilities—such as water
systems, receiving and shipping areas, and access
to sensitive areas—when inspecting, but they
cannot require or enforce security measures. Dairy
and produce inspectors’ roles are even more
limited.
Currently, food defense rests largely with the
industry, and industry efforts vary primarily based on
size, with larger facilities focusing more on security.
The Department should take more steps to promote
food defense at all of the facilities it regulates. For
example, as it has done with meat and poultry
facilities, the Department could provide all facilities it
regulates with a voluntary self-assessment tool that
would help identify security risks. The Department
could also educate the public and industry about
food defense through its Web site. In addition, the
Department should seek additional opportunities to
collaborate with federal, state, and local government
agencies to promote food security by preventing
intentional contamination.
A copy of the full report is available at:
www.azauditor.gov
Contact person:
Shan Hays, (602) 553-0333
Office of the Auditor General
TABLE OF CONTENTS
continued
page i
Introduction & Background 1
Finding 1: Dairy safety program costs should be shared with
industry 7
Department oversees dairy product safety 7
State pays for dairy inspection program but faces economic challenges 8
State and industry should share inspection program costs 12
Recommendations 15
Finding 2: State should consider transferring meat and
poultry inspections to USDA 17
USDA and Department help ensure safe meat and poultry in Arizona 17
State could transfer all meat and poultry inspections to USDA 20
Transferring inspections would likely have minimal impacts to state-inspected
establishments 22
Alternatively, State could increase fees to cover costs 25
Recommendations 26
Finding 3: Department helps to ensure egg safety and
quality 29
Eggs commonly linked to foodborne illness 29
Department inspects and grades eggs 30
Federal regulations also address egg safety 32
TABLE OF CONTENTS
continued
page ii
State of Arizona
Finding 4: Department can further promote produce safety 33
Produce safety is a national concern 33
Department can do more to promote produce safety 36
Recommendation 40
Finding 5: Department should better promote preventative
food defense measures 41
Intentional contamination of food is a risk 41
Department should help industry protect food supply 43
Recommendations 47
Appendix A: Methodology a-i
Agency Response
Tables:
1 Schedule of Revenues, Expenditures, and Changes in Fund Balances
Fiscal Years 2008 and 2009
(Unaudited) 4
2 Dairy License and Permit Types, and Number of Licenses and Permits
October 2009
(Unaudited) 9
Office of the Auditor General
TABLE OF CONTENTS
concluded
page iii
Tables (Continued):
3 Dairy Inspection Program Areas, Regulatory Activities, and Inspection
Frequencies 10
4 Dairy Inspection Program Licensing Fees 11
Figures:
1 Mississippi Joint Legislative Committee on PEER
Structured Fee-Setting Process Developed for State
Government 14
2 States with and without State Meat and Poultry Inspection Programs and
Commercial Red Meat Production by State
Calendar Year 2008
(In Millions of Pounds) 21
3 Percentage of U.S. Fresh Market Vegetable and Melon
Production by State for 24 Selected Crops
Calendar Year 2008 Estimates 37
Photos:
1 Egg Candling 31
State of Arizona
The Office of the Auditor General has conducted a performance audit of the
Department of Agriculture (Department) pursuant to a November 3, 2009, resolution
of the Joint Legislative Audit Committee. This is the first in a series of two reports on
the Department and was conducted as part of the sunset review process prescribed
in Arizona Revised Statutes (A.R.S.) §41-2951 et seq. This audit focuses on the
Department’s food safety and quality assurance inspection programs and identifies
options the State should consider regarding their scope and funding. The second
report will focus on the 12 statutory sunset factors.
The Legislature established the Department in 1989 to provide uniform and
coordinated agricultural programs and policies in Arizona. The Department’s
mission is “to regulate and support Arizona agriculture in a manner that encourages
farming, ranching, and agribusiness while protecting consumers and natural
resources.” One way in which the Department protects consumers is to help ensure
the safety and quality of food produced in Arizona. In 2008, the State produced
approximately 408.3 million pounds of commercial red meat, 4.3 billion pounds of
milk, and 3.3 billion pounds of vegetables and melons. Notably, Arizona was the
nation’s 12th largest producer of milk and the 3rd largest producer of vegetables and
melons in that year.
Food safety and food defense
Recent outbreaks of foodborne illnesses and an increased awareness of homeland
security have renewed national focus on food safety and food defense. Although
food safety and food defense are often highly interrelated, food safety refers to
protecting food from unintentional contamination while food defense refers to
protecting food from intentional contamination (see Finding 5, pages 41 through 47,
for more information on food defense). Contaminated food can lead to serious
illness or death and can have significant economic costs. The U.S. Centers for
Disease Control and Prevention (CDC) estimates that there are about 76 million
cases of foodborne illness in the nation each year. Although most of these cases are
mild, the CDC estimates that about 325,000 people are hospitalized and about 5,000
people die from foodborne illnesses each year. Children, pregnant women, the
elderly, and people with compromised immune systems have a higher risk for severe
illness.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
The annual economic cost of foodborne illness is in the billions of dollars. For
example, the U.S. Department of Agriculture (USDA) estimated in 2000 that the
annual cost of medical care, productivity losses, and premature deaths from
foodborne illnesses caused by five major pathogens—accounting for just 3.4 million
of the estimated 76 million cases—was approximately $6.9 billion.1 Other economic
costs can include those that more directly impact the food industry, such as product
recalls and loss of consumer confidence.
Food can become contaminated at any point in the food supply chain—on farms, in
processing plants, during transportation, or in restaurants and consumers’ homes.
Most contamination involves bacteria such as E. coli or Salmonella, but viruses,
parasites, fungi, and chemicals can also cause foodborne illness. According to the
Center for Science in the Public Interest, the foods most commonly linked to
foodborne illness outbreaks include seafood, produce, poultry, beef, and eggs.2
Consuming raw foods may increase the risk of illness because potential pathogens
are not killed like they would be through cooking or pasteurization. In addition, foods
made from multiple animals or plants, such as ground beef or bagged salad, have
a greater risk of contamination because a pathogen in one animal or plant can
contaminate the whole batch.
Food safety in Arizona
The nation’s food safety system is a complex partnership of federal, state, and local
agencies. At the federal level, 15 agencies have food safety roles, but primary
responsibility is under the U.S. Food and Drug Administration (FDA) and the USDA.
Although the federal government has primary responsibility for food safety, state and
local governments perform much of the food safety work. In Arizona, the
Departments of Health Services and Agriculture share responsibility for food safety.
 Department of Health Services—The Department of Health Services is generally
responsible for overseeing the safety of food and drink provided for human
consumption. It administers a state-wide public health sanitation program to
enforce state food safety regulations, which are consistent with the FDA’s 1999
Model Food Code. Many of the program’s responsibilities have been delegated
to the State’s 15 county health departments. The Department of Health Services
and the county health departments license or permit and routinely inspect food
establishments (such as food manufacturing facilities, food warehouses,
restaurants, and grocery stores) and bottled water facilities to evaluate food
safety practices and sanitary conditions. The Department of Health Services
also monitors and helps investigate foodborne illnesses throughout the State. In
fiscal year 2009, there were 34 confirmed foodborne illness outbreaks in Arizona
1 Crutchfield, S.R., & Roberts, T. (2000). Food safety efforts accelerate in the 1990’s. Food Safety, 23(3), 44-49. Retrieved
December 23, 2009, from http://www.ers.usda.gov/publications/foodreview/septdec00/FRsept00h.pdf
2 The Center for Science in the Public Interest is a nonprofit organization that seeks to improve public health through work on nutrition and
food safety issues. Center for Science in the Public Interest. (2008). Outbreak alert 2008: Closing the gaps in our federal food-safety net.
Retrieved September 21, 2009, from http://www.cspinet.org/new/pdf/outbreak_alert_2008_report_final.pdf
State of Arizona
page 2
that sickened 362 people. Although the food vehicle was not identified for many
of these outbreaks, some of the outbreaks were tied to chicken, ground beef,
peanut butter, and cookie dough. In one of these outbreaks, 20 people were
sickened by contaminated sprouts grown in Arizona.
 Department of Agriculture—The Department helps ensure the safety and quality
of dairy, meat and poultry, eggs, and produce through various inspection
programs (see the next section). It also monitors animal health and agricultural
pests to help prevent harmful diseases and pests that could affect the food
supply. In addition, the Department monitors agricultural workers to ensure the
proper use of pesticides. The Department’s State Agricultural Lab supports
these programs through various analyses, such as testing food samples for
pathogens and identifying harmful agricultural pests.
Department’s food safety programs and program
budgets
The Department helps ensure the safety and quality of dairy, meat and poultry, eggs,
and produce through several inspection programs. Generally, the programs license
and inspect companies that produce, process, handle, transport, or store these
foods to ensure compliance with federal and/or state laws and standards. As of
December 2009, the Department reported that it had a total of 121.35 full-time
equivalent (FTE) positions for these programs, of which 42.25 positions were vacant.
The programs’ funding sources vary. For example, the dairy inspection program is
paid for almost entirely with State General Fund monies, while the egg inspection
program is paid for entirely by industry fees. Table 1 (see page 4) shows each
program’s revenues and expenditures for fiscal years 2008 and 2009. The total fiscal
year 2010 budget for these programs was $5.75 million as of February 2010,
including the budget reductions passed in December 2009.1 Specifically, the
Department’s inspection programs include:
Dairy Inspection Program (4.76 FTEs, 0 vacancies)—Through its dairy
inspection program, the Department regulates the production and processing
of Arizona dairy products by licensing (or permitting) and inspecting dairy farms,
plants, transporters, and other related companies (see Finding 1, pages 7
through 16). The program enforces nationally accepted standards adopted by
the State that allow the Arizona dairy industry to ship grade “A” milk products in
interstate commerce. The Department issued 423 licenses during fiscal year
2009. The program is primarily paid for by the State General Fund. As of
February 2010, the program’s budget for fiscal year 2010 was $359,165.
1 Laws 2009, 5th S.S., Ch. 1, §1, reduced the Department’s State General Fund lump sum appropriation by $696,100 and
its Citrus, Fruit and Vegetable Revolving Fund appropriation by $72,000.
Office of the Auditor General
page 3
State of Arizona
page 4
Animal Products Food Safety
and Quality Inspection Program
Fresh Produce Standardization
and Inspection Program
Meat and Poultry
Inspection
Dairy
Inspection
Egg
Inspection
Citrus, Fruit and
Vegetable
Standardization
Federal-State
Inspection
Service Total
Fiscal Year 2008
Revenues:
State General Fund appropriations $1,040,715 $390,065 $1,430,780
Federal grants 605,570 605,570
Inspection fees and other charges $784,376 $3,393,433 4,177,809
License and fees 2 3,652 3,448 $623,031 167,075 4,650 801,856
Other 3,976 16,878 55,476 76,330
Remittances to the State General Fund (496,412) (3,448) (499,860)
Total net revenues 1,153,525 390,065 627,007 968,329 3,453,559 6,592,485
Expenditures and operating transfers:3
Personal services and related benefits 919,691 328,338 595,300 751,606 2,482,778 5,077,713
Professional and outside services 7,343 1,680 441,626 450,649
Other expenditures and operating transfers 4 113,681 61,727 83,454 143,681 316,344 718,887
Total expenditures and operating transfers 1,040,715 390,065 678,754 896,967 3,240,748 6,247,249
Net change in fund balances $ 112,810 $ -0- $ (51,747) $ 71,362 $ 212,811 $ 345,236
Fiscal Year 2009
Revenues:
State General Fund appropriations $ 896,579 $386,639 $1,283,218
Federal grants 525,906 525,906
Inspection fees and other charges $776,265 $3,195,507 3,971,772
License and fees 2 16,402 20,586 $781,107 183,675 7,348 1,009,118
Other 711 10,124 30,823 41,658
Remittances to the State General Fund (490,083) (3,794) (493,877)
Total net revenues 948,804 403,431 781,818 970,064 3,233,678 6,337,795
Expenditures and operating transfers 3
Personal services and related benefits 787,615 328,411 629,770 659,797 2,345,688 4,751,281
Professional and outside services 4,774 157 62,784 413,722 481,437
Other expenditures and operating transfers 4 104,190 58,228 71,698 274,459 284,027 792,602
Total expenditures and operating transfers 896,579 386,639 701,625 997,040 3,043,437 6,025,320
Net change in fund balances $ 52,225 $ 16,792 $ 80,193 $ (26,976) $ 190,241 $ 312,475
Table 1: Schedule of Revenues, Expenditures, and Changes in Fund Balances1
Fiscal Years 2008 and 2009
(Unaudited)
1 The table does not include the Leafy Green Products Shipper Marketing Agreement because the Department provides only legal and
administrative services for the agreement.
2 Laws 2008, Ch. 291, §12, permitted the Department to raise fees to generate up to $1.1 million during fiscal year 2009; therefore, the Department
increased licensing fees for meat and poultry and dairy inspection programs.
3 Administrative adjustments are included in the fiscal year paid.
4 Amounts include monies transferred to the State General Fund in accordance with Laws 2008, Ch. 53, §23, and Ch. 285, §46. Specifically, for
fiscal years 2008 and 2009, $7,500 was transferred from the Egg Inspection Program (both fiscal years); $9,400 and $35,100 from the Citrus,
Fruit and Vegetable Standardization Program; and $25,400 and $25,500 from the Federal-State Inspection Service Program.
Source: Auditor General staff analysis of the Arizona Financial Information System (AFIS) Accounting Event Transaction File for fiscal years 2008 and
2009.
 Meat and Poultry Inspection Program (17.64 FTEs, 7 vacancies)—The
Department licenses companies that slaughter, process, distribute, transport,
and store meat and poultry products and maintains a federal-state cooperative
program that regulates the slaughter and processing of meat and poultry
products sold within the State (see Finding 2, pages 17 through 27). The
Department issued 236 licenses during fiscal year 2009. The USDA pays for
approximately 50 percent of the program’s direct costs, plus some additional
money to cover indirect costs. The remaining costs are primarily paid for by the
State General Fund. As of February 2010, the program’s budget for fiscal year
2010 was $828,050.
 Egg Inspection Program (15 FTEs, 3 vacancies)—The Department licenses
companies that sell eggs wholesale in Arizona and inspects eggs at laying
facilities, wholesalers, and retail stores to enforce state egg laws and regulations
(see Finding 3, pages 29 through 32). The Department issued 82 licenses
during fiscal year 2009. In addition, the USDA contracts with the Department to
provide egg-grading services to the industry upon request. The Egg Inspection
Program is paid for by the egg industry. As of February 2010, the program’s
budget for fiscal year 2010 was $866,700.
 Citrus, Fruit and Vegetable Standardization Program (20 FTEs, 12.75
vacancies)—The Department licenses produce dealers, packers, and shippers
through its Citrus, Fruit and Vegetable Standardization Program. The
Department issued 525 licenses during fiscal year 2009. Historically, the
standardization program inspected fresh produce to enforce state quality
standards that include factors such as size, color, and shape. The program also
provides administrative services for a marketing agreement created in 2007 with
Arizona’s leafy greens industry designed to promote safe growing and handling
practices through food safety audits. In 2009, the Department began changing
the program’s focus from quality standards to food safety (see Finding 4, pages
33 through 40, for more information about the standardization and the leafy
greens marketing agreement). The leafy greens industry pays for and runs the
marketing agreement. The produce industry pays for the standardization
program. As of February 2010, the standardization program’s budget for fiscal
year 2010 was $630,625.
 Federal-State Inspection Service Program (63.95 FTEs, 19.5 vacancies)—Since
1996, the USDA has contracted with the Department to perform various federal
inspection services and enforce U.S. import requirements at the Arizona-Mexico
border. The inspection services are generally voluntary and performed at
produce sellers’ or buyers’ request. Generally, these inspections focus on
ensuring grade or quality standards, but one service entails food safety audits
at growers’ or packers’ request as part of the USDA’s Good Agricultural
Practices and Good Handling Practices (GAP/GHP) Audit Verification Program
(see Finding 4, pages 33 through 40, for more information about the GAP/GHP
Office of the Auditor General
page 5
audit program). The Federal-State Inspection Service Program is paid for by
industry fees. As of February 2010, the program’s budget for fiscal year 2010
was $3,065,460.
Audit scope and objectives
This audit focused on the Department’s role in food safety and defense related to
Arizona-produced agricultural products. Specifically, the audit focused on the four
foods the Department regulates—dairy, meat and poultry, eggs, and produce—and
their respective inspection programs. In addition to examining food safety and food
defense issues related to these programs, the audit identified options the State
should consider regarding the programs’ scope and funding.
This audit was conducted in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our
audit objectives.
The Auditor General and staff express appreciation to the Director of the Department
and his staff for their cooperation and assistance throughout the audit.
State of Arizona
page 6
Dairy safety program costs should be shared with
industry
The Department of Agriculture (Department) should propose fee changes that would
increase the dairy industry’s share of the costs for the Department’s dairy inspection
program. The Department helps ensure the safety of Arizona milk and milk products
by licensing and inspecting dairy industry facilities and testing dairy products to verify
compliance with milk product safety standards. Historically, the Department has
funded its dairy inspection program primarily through State General Fund monies,
but the Department is facing significant budget cuts. Because both the industry and
the public receive benefits from the dairy program, the State should share more of
the costs of the dairy inspection program with the industry, as is done in some other
states auditors reviewed. In developing a proposal for modifying fees, the
Department should consider several factors, including ways to equitably allocate
costs, the impact on the dairy industry, and the efficiency of department operations,
including any opportunities to reduce the level of regulation.
Department oversees dairy product safety
The Department regulates the safety of milk and milk products in Arizona by
enforcing national and state sanitation and safety standards. In 2008, dairy products
were ranked as Arizona’s most valuable agricultural commodity, generating 22
percent of all farm-related receipts and producing over 4.3 billion pounds of milk. By
statute, the State has adopted national standards called the pasteurized milk
ordinance for grade “A” milk and dairy products (see textbox, page 8).1 In addition,
statute requires the Department to regulate manufactured products, such as cheese,
butter, and frozen desserts, according to the U.S. Department of Agriculture’s
(USDA) general specification for dairy plants. The pasteurized milk ordinance was
developed jointly by the U.S. Food and Drug Administration (FDA), state regulatory
agencies, and the dairy industry, and represents the minimum standards adopted in
all 50 states. The FDA reviews the Department’s program every 3 years to ensure that
the Department is adequately enforcing the ordinance. The FDA’s most recent
Dairy products were
Arizona’s most valuable
agricultural commodity
in 2008.
1 Arizona Revised Statutes (A.R.S.) §3-605 adopts the federal milk ordinance, which is defined in A.R.S. §3-601(5) as the
FDA’s grade “A” pasteurized milk ordinance.
Office of the Auditor General
page 7
FINDING 1
review, published in February 2008, found that the Department was in substantial
compliance with the ordinance’s requirements.
To ensure compliance with the state and national standards, the Department licenses
or permits companies and individuals, inspects farms and facilities, and tests samples
of milk products. As shown in Table 2 (see page 9), as of October 2009, the
Department had permits or licenses for approximately 120 dairy farms and numerous
other individuals and companies that transport, sample, process, and distribute milk
and milk products. The Department’s inspections evaluate overall sanitation and other
specific processes and conditions (see Table 3, page 10). For example, auditors
observed department staff conducting two unannounced dairy farm inspections.
During the 2-hour visit to each farm, the department inspector performed inspection
activities such as ensuring that milk houses were clean and had hand-washing
facilities, and that equipment properly protected milk during transfer. The pasteurized
milk ordinance requires dairy farms to be inspected at least once every 6 months.
State pays for dairy inspection program but faces
economic challenges
Although the dairy industry pays some licensing fees, the State General Fund pays for
almost all of the dairy inspection program’s costs. However, the Department is facing
significant budget cuts that may affect the program. The dairy industry has also
experienced an economic downturn that may be ending.
State of Arizona
page 8
Grade “A” pasteurized milk ordinance.
The pasteurized milk ordinance is a nationally recognized milk sanitation and
safety standard for grade “A” milk and milk products. The FDA developed the
ordinance in collaboration with state regulatory agencies and the dairy industry.
It is used in all 50 states as the basis for certifying companies that ship dairy
products interstate through a federal-state cooperative program. Although the
FDA ultimately has legal jurisdiction over dairy products shipped in interstate
commerce, states carry out most of the monitoring and enforcement that the
ordinance requires under FDA oversight.
Source: Auditor General staff analysis of the grade “A” pasteurized milk ordinance, 2005 revision; Taylor,
M.R., & David, S.D. (2009). Stronger partnerships for safer food: An agenda for strengthening state
and local roles in the nation’s food safety system. Retrieved April 17, 2009, from
http://www.thefsrc.org/State_Local/statelocal_report_release.htm
Office of the Auditor General
page 9
Number of Licens es or
Permits
Dairy (permit) 117
A farm where milk is produced. Although statute does not require dairy farms to
obtain a license to operate, the pasteurized milk ordinance, which is adopted by
statute, requires dairy farms to obtain a permit.
Milk hauler/sampler 289
A person who transports raw milk or raw milk products to or from a dairy, milk
plant, or other milk station. Licensees are also authorized to collect raw milk
samples for laboratory testing.
Producer-distributor 6
A dairy farm that processes and distributes grade “A” milk using milk from its own
farm.
Producer-manufacturer 1
A dairy farm that manufactures and distributes milk products, such as cheese or
butter, using milk from its own farm.
Milk distributing plant 8
A plant that processes and distributes grade “A” milk and milk products.
Manufacturing plant 14
A plant that manufactures milk products, such as cheese or butter. These plants
commonly use grade “B” milk, which is not subject to the pasteurized milk
ordinance, to manufacture the products.
Wholesale distributor 60
A warehouse where finished liquid milk products or other milk products such as
cheese and cream are stored at cold temperatures before shipping to smaller
retailers.
1 License or Permit Type and Definition
1 Because the table is current as of October 2009, the total number of licenses and permits listed in the table does not
equal the total number of dairy licenses issued during fiscal year 2009 (reported in the Introduction and Background
section of this report).
Source: Auditor General staff analysis of A.R.S. §§3-601, 3-605, 3-607, and 3-619; the grade “A” pasteurized milk ordinance,
2005 revision; and information on dairy licenses and permits provided by department staff.
Table 2: Dairy License and Permit Types, and Number of Licenses and Permits
October 2009
(Unaudited)
Dairy industry pays almost none of the Department’s regulatory
costs—As of fiscal year 2009, the State General Fund paid for almost all of the
dairy inspection program’s costs. Licensing fees have generally offset less than 1
percent of these costs, and even with fiscal year 2009 increases, fees offset only
approximately 5 percent of the costs. For example, in fiscal year 2008, the
Department received $3,448 in licensing-fee revenue, which offset $390,065 in
program costs, not including costs incurred by the State Agricultural Laboratory for
testing milk and dairy product samples. Historically, statutory licensing fees for the
dairy program have not increased for over 50 years, with one minor exception.1
However, the Legislature authorized temporary fee increases in fiscal years 2009
and 2010 (see Table 4, page 11, for the statutory and temporary fees). In fiscal year
2009, the Department collected $20,586 in dairy-licensing fees because of the
temporary increase.2 In addition, the Department has been concerned with the
funding of the dairy program and discussed these concerns with some industry
representatives beginning in January 2008.
Department and dairy industry face economic challenges, but
industry shows signs of recovery—The Department has faced significant
budget cuts in fiscal years 2009 and 2010. According to a department official, the
Department has tried to minimize the impact of budget cuts on the dairy inspection
program to maintain food safety and compliance with the statutorily required
pasteurized milk ordinance. The pasteurized milk ordinance is the accepted
national standard for milk, and failing to perform the ordinance requirements could
jeopardize the Arizona dairy industry’s ability to market milk products in other
states. According to an industry representative, almost all of the dairy plants in
State of Arizona
page 10
Inspection Area Examples of Regulatory Activities
Minimum Inspection
Frequency
Dairy Farms Inspect facility, equipment, milking procedures, and test water used to
chill milk
Sample and test the water supply
6 months
3 years
Transportation Inspect hauler/sampler’s sampling procedures
Inspect milk tank trucks
Inspect truck-cleaning facilities and transfer stations
24 months
12 months
6 months
Plants Inspect facilities and test pasteurization equipment at milk-distributing
plants
Inspect facilities and test pasteurization equipment at manufacturing
plants
3 months
6 months
Dairy Product
Testing
Test raw milk samples from each farm and finished products from each
plant at the State Agricultural Laboratory
4 in 6 months
Source: Auditor General staff analysis of the grade “A” pasteurized milk ordinance, 2005 revision; A.R.S. §3-622, USDA’s
general specifications for dairy plants; and department inspection forms, staff interviews, and Auditor General
staff observations of dairy inspections.
Table 3: Dairy Inspection Program Areas, Regulatory Activities, and Inspection Frequencies
1 Fees have not increased since 1951, with the exception of the wholesale distributor license, which was added in 1962.
2 Laws 2008, Ch. 291, §12, and Laws 2009, 4th S.S., Ch. 3, §23, authorized the Department to increase fees for fiscal years
2009 and 2010.
The Department has
tried to minimize the
impact of budget cuts
on the dairy inspection
program.
Arizona have out-of-state business. Program officials reported that, in response to
budget constraints, the Department has limited staff training and travel
expenditures. Further, one official stated that program staffing is at the minimum
necessary to support the Department’s food safety mandates and meet the
requirements of the pasteurized milk ordinance. On February 1, 2010, the
Department reduced the program’s budget in response to Laws 2009, 5th S.S.,
Ch. 1, §1, and the impact on program activities was unknown as of February 3,
2010.1
The dairy industry also experienced an economic downturn in fiscal year 2009.
Specifically, that year’s milk price declined from $18.40 per hundredweight in
August 2008 to $11.30 per hundredweight in June 2009 before beginning to rise
again.2 Milk prices fluctuate with the supply of milk and other factors. For example,
the calendar year average price per hundredweight was $12.88 in 2006, $19.13 in
2007, and $18.32 in 2008. As of early December 2009, a department official
reported that ten Arizona dairy farms had closed since July 2008, including
closures to clear land for development as well as temporary closures where the
farmers planned to restore their herds when prices increase. Prices had increased
to $16.30 per hundredweight in December 2009, and according to one industry
analyst, the 2009 downturn was ending and prices were expected to remain
higher.3
Office of the Auditor General
page 11
Annual Fee
License or Permit Type Statutory Fee Temporary Fee1
Dairy No fee No fee
Milk hauler/sampler $5 (initial)
$1.50 (renewal)
$50 (initial)
$30 (renewal)
Producer-distributor $25 $150
Producer-manufacturer $25 $150
Milk distributing plant $50 $300
Manufacturing plant $50 $100
Wholesale distributor $25 $100
1 Laws 2008, Ch. 291, §12, and Laws 2009, 4th S.S., Ch. 3, §23, authorized the Department to increase
fees for fiscal years 2009 and 2010.
Source: Auditor General staff analysis of A.R.S. §§3-607 and 3-619 and dairy inspection program
licensing fees information provided by department staff.
Table 4: Dairy Inspection Program Licensing Fees
1 Laws 2009, 5th S.S., Ch. 1, §1, reduced the Department’s State General Fund lump sum appropriation by $696,100 and
its Citrus, Fruit and Vegetable Revolving Fund appropriation by $72,000.
2 All figures in this paragraph are from the USDA Economic Research Service. (2010, January 26). U.S. dairy situation at a
glance. Retrieved February 12, 2010, from http://www.ers.usda.gov/publications/ldp/LDPTables.htm; USDA Economic
Research Service. (2009, November 24). U.S. dairy situation at a glance. Retrieved December 4, 2009, from
http://www.ers.usda.gov/publications/ldp/LDPTables.htm
3 The Commodity Update: The Monthly Newsletter for Multi-Unit Foodservice Purchasing Executives. (2009, October 8).
Dairy update, 19(10), 3. Retrieved December 3, 2009, from http://www.mktvsn.com/MarketVision_CommodityUpdate.pdf
State and industry should share inspection program
costs
According to guidance on setting government user fees, because the industry
benefits from the dairy inspection program’s work, it should also help support the
cost of regulation. In four of ten other states’ dairy inspection programs that auditors
reviewed, industry fees provide most of the programs’ funding, and of the six states
funded similarly to Arizona using primarily general fund monies, four states use fees
to provide a higher portion of the costs than in Arizona. The Department should
propose fee changes to have the industry share a greater portion of the dairy
inspection program costs. The proposed fees should be determined using a fee-setting
approach that considers what portion of the cost should be shared, any
possible ways to cut costs in the existing program, and the impact of any fee
increases on the industry.
Dairy inspection program costs should be shared with the
industry—Fee-setting principles can guide decisions about the amounts
industry and government should pay for regulation. According to guidance on
setting user fees in government, the parties that benefit from a government
program should help pay for the regulatory costs.1 For example, the egg industry
pays fees to the Department to cover the cost of regulation for egg inspection
services that benefit the egg industry. The dairy inspection program benefits both
the industry and the public. Specifically, the dairy industry benefits from the ability
to market milk interstate while the public benefits from the assurance that dairy
products are produced and processed safely as outlined in the pasteurized milk
ordinance. In addition, the industry may benefit from an enhanced public
perception of product quality and safety. According to department officials,
industry members are generally not opposed to paying higher fees as long the
monies are used for the program and not transferred to the General Fund.
Some other states share more of the cost with industry—In some other
states surveyed, the industry generally pays more of the cost of dairy inspection
than in Arizona. Auditors reviewed dairy inspection program funding in six western
states and four states with milk production volume similar to Arizona’s.2 According
to officials in those states:
 Four of the ten states fund a majority of their dairy inspection program costs
through industry fees. For example, since at least 1997, Ohio statute has
allowed the state to charge up to 63 percent of the dairy inspection program
cost to the industry through licensing and inspection fees such as an
inspection fee based on the amount of raw milk or dairy product used at
State of Arizona
page 12
1 United States Government Accountability Office. (2008). Federal user fees: A design guide (GAO-08-386SP). Washington,
D.C.: Author.
2 States contacted include six western states—California, Colorado, Idaho, New Mexico, Utah, and Washington—and four
additional states with similar milk production volume—Indiana, Iowa, Ohio, and Vermont.
The dairy industry
benefits from the
inspection program.
Four states pay most of
their dairy inspection
program costs through
industry fees.
processing plants and frozen dessert manufacturers. According to an Ohio
official, although industry fees covered as little as 40 percent of costs in fiscal
year 2001, as of fiscal year 2010, industry fees covered nearly the full 63
percent allowed by law. Similarly, industry fees covered 83 percent of
California’s dairy inspection program costs in 2008. California charges various
fees such as licensing fees, penalties, and assessments based on the type of
work inspectors perform and the size of the facility needing inspection.
According to a California program official, although the percentage of
program costs covered by fees can vary somewhat each year, the practice of
charging fees to the industry has existed for at least the past 5 years. Further,
according to an official in Idaho, industry fees have covered nearly 100
percent of its dairy inspection program costs for the past 30 years. Finally,
according to an Iowa dairy program official, about 80 percent of the program
budget has come from industry fees.
 Among the six states that use mainly general fund monies to pay for their dairy
inspection programs, four share a higher percentage of their programs’ costs
with the industry than Arizona does. According to officials in these states,
industry fees have covered between 5 percent and 17 percent of their
programs’ costs compared to less than 1 percent in Arizona in fiscal year
2008.1 For example, in Washington, industry fees have covered 17 percent.
Further, dairy program officials in both Vermont and Utah stated that their
programs are about 7 percent funded by fee revenue. Finally, according to a
Colorado dairy inspection program official, fees covered approximately 5
percent of Colorado’s total program costs after fees were increased in fiscal
year 2009.
Department should propose fee changes—The Department should take
steps to reevaluate the current fee structure for the dairy inspection program and
propose changes for legislative consideration that would increase the industry’s
share of the program costs. Because the dairy inspection program benefits both
the industry and the public, it may be appropriate for the industry to share more of
the regulatory costs. In determining how the costs will be shared, the Department
should use a structured approach that takes several variables into account.
Mississippi’s Joint Legislative Committee on Performance Evaluation and
Expenditure Review (PEER) developed an approach that the Department might
find useful.2 PEER’s approach consists of a decision model for establishing or
increasing government fees, called the Theory of Fee Setting in Government, and
guidance on implementing new fees. Figure 1 (see page 14) summarizes key
concepts from PEER’s approach. Similarly, in 2008, the U.S. Government
Accountability Office issued a design guide for federal user fees that offers similar
suggestions for setting fees. By taking a structured approach, the Department
would consider several factors from these guidelines, including:
1 In fiscal year 2009, Arizona’s fees were temporarily increased and covered approximately 5 percent of the program’s
costs. The fees were also increased for fiscal year 2010.
2 Joint Legislative Committee on Performance Evaluation and Expenditure Review: (2002). State agency fees: FY2001
collections and potential new fee revenues. Jackson, MI: Author.
Office of the Auditor General
page 13
State of Arizona
page 14
Determine whether fees or taxes should fund the service
Who benefits from the service: individuals, the public, or both?
Fees should finance services that benefit individuals.
Taxes should finance services that benefit the public.
When both individuals and the public benefit from a service, financing can come from
both fees and taxes.
Identify and analyze legal issues
Are fees limited by statute? If so, is legislation required to change them?
Should administrative rules be revised?
Identify the fees’ purpose
Should fees cover the cost of providing the service?
Should fees be set to influence behavior?
Should fees be set to encourage compliance with program regulation and goals?
Assess factors influencing fees amount
What effect will fees have on those who pay them?
What effect will fees have on annual revenue?
What do similar states charge for the service?
Will the public accept the fees’ necessity?
Is the Department subsidizing other government operations?
Determine appropriate methodology for setting fees
Determine if there is a comprehensive cost accounting system.
Seek to reduce costs as much as possible.
Measure direct and indirect costs of the time staff spends in service activities.
Determine economic impact on regulated entities.
Implement fees
Obtain amended legislation and regulation as needed.
Prepare those who pay fees for changes by providing advanced notice and explaining the
purpose and reasoning of new fees.
Train staff to answer questions regarding the new fees.
Periodically assess revenue, costs, and program outcomes to
update fee amounts
Source: Auditor General staff analysis of fee-setting model included in the State agency fees: FY
2001 collections and potential new fee revenues report prepared by the Mississippi Joint
Legislative Committee on PEER.
Figure 1: Mississippi Joint Legislative Committee on PEER
Structured Fee-Setting Process Developed for State
Government
 Funding mix—The Department should consider what portion of total dairy
inspection program costs the industry should pay based on program benefits to
the industry. All program-related costs should be included, and the Department
should ensure that it has an adequate process for tracking direct and indirect
cost data for the dairy inspection program, including dairy product testing at the
State Agricultural Laboratory. The Department should then consider how it could
equitably allocate the industry portion of costs among different types of industry
members based on the work required to regulate each member, such as farms,
plants, and milk haulers/samplers.
 Costs and efficiency of department operations—The Department should
evaluate the dairy inspection program’s efficiency to ensure that program costs
are not higher than necessary to complete its work. In addition, the Department
could consider whether to propose separate fees for activities such as follow-up
inspections that department staff conduct to ensure that licensees correct
problems discovered during inspections. As part of its review, the Department
should consider whether it can reduce costs by reducing the amount of
regulation it provides. However, because the Department enforces the
pasteurized milk ordinance, which is the basic nationally accepted standard, it
may not be able to significantly decrease its regulatory role without affecting the
industry’s ability to market its products.
 Impact on the industry—The Department should consider how the fees would
affect industry members. For example, some licensees may be less able than
others to absorb or pass on additional regulatory costs because of the size or
nature of their business. The Department should obtain stakeholders’ input in
developing its proposal, and, if proposed fees are significantly higher than
existing fees, it might recommend gradually phasing in fee increases.
Because dairy program fees and regulatory requirements are established in statute,
the Department should develop a proposal for legislative consideration, including a
recommended timetable for gradually implementing any significant changes.
Recommendations:
1.1. The Department should propose fees to the Legislature that would increase
the industry’s share of the dairy inspection program’s costs. In developing the
proposal, the Department should:
a. Consider what portion of total program costs the industry should pay
based on program benefits to the industry;
Office of the Auditor General
page 15
The Department should
obtain industry input
regarding how
increased fees would
impact industry
members.
b. Ensure that it has an adequate process for tracking direct and indirect cost
data for the dairy inspection program, including dairy product testing at the
State Agricultural Laboratory;
c. Develop equitable fees that address factors that influence cost, such as the
work required to regulate different members of the dairy industry;
d. Evaluate the dairy inspection program’s efficiency to ensure that program
costs are not higher than necessary to complete its work, including
identifying any possible reduction in regulation that can be achieved without
affecting the industry’s ability to market its products;
e. Consider the effect fee increases may have on different establishment
types and obtain their input in proposing new fees. If proposed fees are
higher than current fees, the Department might recommend gradually
phasing in fee increases; and
f. Submit its proposal to the Legislature for consideration.
1.2. After receiving the Department’s proposal, the Legislature should consider
modifying statute to raise existing dairy inspection program fees, authorize the
Department to create additional fees, and/or modify the level of regulation the
Department provides.
State of Arizona
page 16
State should consider transferring meat and
poultry inspections to USDA
The Legislature should consider federalizing the state meat and poultry inspection
program, which the federal government will take over at no cost to the State. Both the
U.S. Department of Agriculture (USDA) and the Department of Agriculture
(Department) help ensure the safety of meat and poultry products in Arizona. The
USDA performs food safety inspections on meat and poultry sold in interstate
commerce, while the Department is part of a voluntary agreement with the USDA to
inspect meat and poultry sold within the State in a program that must be at least
equal to the federal program. If the State transferred all meat and poultry inspections
to the USDA, as is the case in 23 states, it would save the State over $400,000 in
State General Fund monies. Although such a move would pose potential impacts to
state-inspected establishments that could include transition costs, higher and more
overtime fees, and less individualized service, these impacts should not be
widespread. Alternatively, if the Legislature decides that the State should retain its
program, it should consider raising fees to cover the state program’s costs.
USDA and Department help ensure safe meat and
poultry in Arizona
Federal laws require all slaughter and processing establishments to be under federal
or state inspection to help ensure the safety of meat and poultry products. State law
allows establishments to be under either federal or state inspection, but
establishments must be under federal inspection to sell meat and poultry products
out of state. Although more Arizona establishments are under state inspection, they
produce significantly less meat than federally inspected establishments, and almost
all cattle slaughtered in Arizona are slaughtered in federally inspected
establishments.
Office of the Auditor General
page 17
FINDING 2
Federal laws require meat and poultry inspections—Meat and poultry are
some of the foods most commonly linked to foodborne illness outbreaks, and
federal laws require that all meat and poultry sold in commerce be inspected to
help ensure their safety. Specifically, the federal meat and poultry inspection acts
require inspection of slaughter and processing establishments to help ensure that
animals are disease-free, facilities are clean and sanitary, and meat and poultry
products are wholesome and properly labeled. Under these laws, the USDA is
required to inspect meat and poultry sold in interstate or foreign commerce. The
laws also allow states to inspect meat and poultry sold within state borders through
federal-state cooperative agreements, but they require state programs to be “at
least equal to” federal inspection (see textbox).
In addition, the laws exempt establishments that
slaughter or process meat and poultry for an animal
owner’s personal consumption from mandatory
inspection. However, the federal laws still require these
establishments—referred to as custom-exempt
establishments—to follow certain regulations, such as
handling livestock humanely and maintaining sanitary
conditions, and inspectors periodically review them to
determine compliance with applicable regulations. The
USDA requires states with inspection programs to
review custom-exempt establishments. Although
these laws encourage states to have inspection
programs by authorizing the USDA to cooperate with
states and reimburse states up to 50 percent of their
inspection program costs, federal law does not require
state inspection programs. Rather, in states that do not
have their own programs, the USDA inspects all
commercial and custom-exempt establishments in the
state.
USDA and Department inspect meat and poultry in Arizona—Both
federal and state inspectors help ensure the safety of meat and poultry products
in Arizona. State law establishes a state inspection program within the Department
and requires all establishments that slaughter or process meat and poultry for
commercial sale to be under either federal or state inspection. Although
establishments that slaughter or process meat and poultry for interstate commerce
must be under federal inspection, establishments that slaughter or process meat
and poultry for sale within the State may choose either federal or state inspection.
In Arizona, 27 establishments are under federal inspection, including a large
slaughter and processing plant in Tolleson, while 34 establishments are under
state inspection. Most of the state-inspected establishments are urban facilities
that process meat and poultry products, but seven establishments, including all six
State of Arizona
page 18
“At least equal to” provision
The “at least equal to” provision of the federal
meat and poultry inspection acts requires that state
inspection programs operate in a manner that is at
least as effective as, but not necessarily the same
as, the federal inspection program. States that fail
to administer programs at least equal to the federal
program can be “designated,” meaning the USDA
will take over all meat and poultry inspections. The
USDA regularly reviews state inspections
programs to determine compliance with this
provision.
Source: Auditor General staff analysis of the U.S. Department
of Agriculture Food Safety Inspection Service directive
number 5720.3. and the Federal Meat Inspection Act.
Establishments may
choose either federal or
state inspection to sell
their products within the
State.
of the state-inspected slaughterers, are in rural areas
(see textbox, which profiles two state-inspected
establishments). The Department also inspects 47
custom-exempt establishments located throughout
the State. Although there are more state-inspected
establishments, they produce significantly less meat
than federally inspected establishments. For example,
in 2008, federally inspected establishments
slaughtered over 99 percent (535,900 out of 539,100
head) of all cattle slaughtered in Arizona.1 According
to department officials, the large federally inspected
plant in Tolleson accounts for most of the cattle
slaughter in the State.
Arizona has adopted federal meat and poultry
regulations, thereby meeting the requirement that the
state program be at least equal to the federal
program, and federal and state inspectors essentially
perform the same functions at their respective
establishments. Federal and state regulations require
commercial slaughter and processing establishments
to develop and implement sanitary operating
procedures and preventative controls designed to
reduce the risk of contamination. Inspectors are
required by federal regulations to visit these
establishments each day they are in operation to
ensure that operators are following their safety plans.
For example, inspectors verify that slaughter
equipment is properly sanitized or that ready-to-eat
meat products are thoroughly cooked. Inspectors are
also required to sample meat and poultry products to
verify whether they are free of adulterants such as E. coli in raw beef products or
Listeria in ready-to-eat products. Additionally, at slaughterhouses, inspectors also
check for signs of disease in animals before and after slaughter and ensure
animals are handled humanely. Both federal and state laws prohibit the slaughter
of animals whose meat is sold for human consumption without an inspector at the
facility, and inspectors are present at all times during slaughtering. Meat and
poultry inspectors are required to inspect processing plants each day they are in
operation, but may visit several processing plants in a given day. Unlike
commercial establishments that are inspected daily, custom-exempt
establishments are reviewed less frequently, typically about once or twice per year.
1 Conversely, 86 percent (2,500 out of 2,900 head) of hogs in 2007 and 90 percent (900 out of 1,000 head) of sheep and
lamb in 2008 were slaughtered at state-inspected plants.
Office of the Auditor General
page 19
Profile of two state-inspected Arizona
establishments
Rural slaughter/processing establishment—This
establishment, located in rural Arizona, has been
state-inspected since 2007. Three days per month,
this establishment slaughters and processes meat to
sell commercially, and the rest of the month, it
slaughters and processes meat for the livestock
owners’ personal consumption. About 80 percent of
its commercial product is sold at local farmers
markets in Phoenix and Tucson. With seven full- and
part-time positions, this establishment had about
$250,000 in sales in 2008.
Urban processing establishment—This processing
establishment, located in Phoenix, produces ready-to-
eat products such as beef, chicken, and pork
burritos and sells most of them to hotels, resorts,
and restaurant chains. This establishment is under
both state and federal inspection. It has been under
state inspection since 1997, but obtained federal
inspection in 2008 for some of its products that are
sold out of state. It also has federal inspection for its
Saturday operations. Operating 6 days per week and
with nearly 40 employees, this establishment had
about $2 million in overall sales in 2008.
Source: Auditor General staff interviews with two state-inspected
establishments.
State could transfer all meat and poultry inspections to
USDA
The Legislature should consider transferring all meat and poultry inspection to the
USDA. Almost half of U.S. states already rely solely on federal inspections. In
addition, transferring all meat and poultry inspections to the USDA would save the
State money and allow more establishments to sell products out of state. Further,
transferring the function would not appear to compromise public health.
Many states do not have their own meat and poultry inspection
programs—Twenty-three states do not have their own meat and poultry
inspection programs but instead rely on federal inspection. As shown in Figure 2
(see page 21), these states include big meat-producing states such as Nebraska
and Colorado, as well as small producers such as Nevada and New Mexico.
Additionally, only 4 of the 13 western states have state meat and poultry inspection
programs. According to a 2001 study performed by Nebraska’s public policy
center, some states have not adopted meat and poultry inspection programs
because of the cost, lack of political support, or the lack of need for both a state
and federal program.1 Although other states have considered starting state meat
and poultry inspection programs, Minnesota, North Dakota, and Missouri were the
last states to do so, in 1999, 2000, and 2001, respectively. According to a North
Dakota state official, North Dakota started its program partly because farmers and
ranchers thought it would provide more opportunities for small meat producers,
and one reason legislators continue to support the program is that they feel the
state program is more responsive to the needs of the industry than the federal
program. Conversely, New Mexico was the last state to eliminate its meat and
poultry inspection program. It requested that the USDA assume responsibility for
all meat and poultry inspections in 2007.
Transferring meat and poultry inspections would have benefits—
Transferring all meat and poultry inspections to the USDA would also benefit the
State and the industry. For the State, transferring inspections would save State
General Fund monies because the USDA would take over all inspections,
including inspections at custom-exempt establishments, at no cost to the State.
Based on fiscal year 2009 program costs, transferring all meat and poultry
inspections to the USDA would have saved the State approximately $450,000 in
State General Fund monies, although the State would also have lost approximately
$77, 000 in indirect cost recovery associated with the federal funding for the state
program. In fiscal year 2010, the savings would be approximately $414,000
because the Department reduced the fiscal year 2010 budget for the meat and
poultry program by over $72,000.2
1 University of Nebraska Public Policy Center. (2001). Potential impacts of state meat and poultry inspection for the State of Nebraska.
Retrieved May 20, 2009, from http://ppc.unl.edu/userfiles/file/Documents/projects/StateMeatInspection/PotentialImpacts.pdf
2 Laws 2009, 5th S.S., Ch. 1, §1, reduced the Department’s State General Fund lump sum appropriation by $696,100.
State of Arizona
page 20
The USDA would take
over all inspections at
no cost to the State.
For the industry, federal inspections would allow current state-inspected
establishments to ship meat products across state lines. The extent to which
establishments would actually use this benefit is unclear: out of ten state-inspected
establishments auditors interviewed, only one expressed a desire to sell its meat in
interstate commerce. Still, federal inspection may provide more marketing options for
state-inspected facilities even if establishments do not sell out of state. One USDA-inspected
establishment auditors spoke with suggested that federal inspection may
carry more weight than state inspection for retailers.
Office of the Auditor General
page 21
WA
815.0
OR
57.8
CA
1,662.2
AZ
408.3
NM
5.7
AK
0.5
HI
10.8
NV
1.3 UT
520.2
WY
6.2
CO
2,133.9
ID
231.5
MT
16.6
ND
28.5
SD
1,030
NE
7,392.8
KS
5,349.6
OK
1,120.5
TX
5,167.1 LA
7.2
MS
15.5
AR
64.3
TN
225.2
AL
24.0
GA
157.1
FL
99.6
SC
251.9
NC
2,510.6
VA
507.7
KY
588.1
MO
1,690.8
IL
3,029.4
IA
7,067.8
MN
2,584.6
WI
1,449.0
IN
1,679.8
MI
524.1
OH
309.3
PA
1,336.9
NY
36.7
ME
NJ
CT RI
MA
NH
VT
WV
7.3
States with State Meat and Poultry Inspection
States without State Meat and Poultry Inspection
48.1
MD
DE
36.9
CT
MA
ME
NH
RI
VT
13.8
Figure 2: States with and without State Meat and Poultry Inspection Programs and
Commercial Red Meat Production by State1
Calendar Year 2008
(In Millions of Pounds)
1 Georgia and South Dakota have state meat inspection programs but rely on the USDA for poultry inspection.
Source: Auditor General staff analysis of states with and without state inspection programs provided by the USDA’s
Web site and USDA data on commercial red meat production by state. United States Department of
Agriculture, National Agriculture Statistics Service. (2009). Livestock slaughter 2008 summary. Retrieved
August 12, 2009, from http://usda.mannlib.cornell.edu/usda/current/LiveSlauSu/LiveSlauSu-03-06-2009.pdf
Transferring meat and poultry inspections should not compromise
public health—Arizona has adopted federal meat and poultry regulations, and
the state meat and poultry inspectors perform the same functions as federal
inspectors; therefore, transferring the inspection responsibility should have little
impact on public health. Auditors identified only one situation where the transfer
would result in reduced inspections. Specifically, according to a USDA directive,
federal inspectors typically conduct only one review per year at custom-exempt
slaughter and processing establishments that comply with federal regulations,
whereas Arizona statute requires at least two inspections per year at slaughter
establishments.1 However, because these establishments slaughter or process
meat only for an animal owner’s personal consumption, and because the USDA
directs federal inspectors to review noncompliant establishments more frequently,
having only one inspection instead of two at compliant facilities would be unlikely
to affect public health.
One concern department officials have raised about the potential change is that
the USDA may pay little attention to the issue of illegal slaughter. Under state law,
it is illegal to slaughter meat and poultry to be sold for human consumption without
an inspector present. However, federal law also prohibits slaughtering meat or
poultry to be sold for human consumption without an inspector present, and USDA
compliance officers investigate reports of this type of activity.
Additionally, department officials believe transferring inspection to the USDA could
compromise food safety because most meat and poultry recalls occur at federally
inspected plants. However, this may be because, nationally, almost all meat is
slaughtered under federal inspection. According to the USDA, between 93.7
percent and 99.1 percent of livestock slaughter in 2008 occurred in federally
inspected plants, depending on the species.2 Moreover, the USDA testified to
Congress that over 98 percent of federally inspected plants met regulatory
requirements in 2008.
Transferring inspections would likely have minimal
impacts to state-inspected establishments
Transferring meat and poultry inspections to the USDA could have some impacts to
some state-inspected facilities. Although state law already incorporates federal
facility requirements and, therefore, establishments should not incur major costs to
comply with the federal requirements, minor costs such as changing product labels
could be encountered. Further, some facilities that have overtime operations would
pay a higher rate for overtime inspections. These cost impacts, however, should not
be widespread. In addition, some department and industry representatives believe
federal inspection will not offer the individualized attention and assistance provided
1 According to a department official, state inspectors perform at least one inspection per year at custom-exempt
processors, similarly to the USDA. Statute does not establish an inspection frequency for custom-exempt processors.
2 Federally inspected livestock slaughter includes cattle, calves, hogs, and sheep.
State of Arizona
page 22
Nationally, almost all
meat is slaughtered
under federal
inspection.
by the state inspection program, but the USDA has taken several steps to improve
its outreach to smaller establishments. Nonetheless, it is possible that some plants
would not make the transition to federal inspection, and some may close.
Specifically:
 Some establishments may incur minor transition costs—According to a USDA
official, the transition from state to federal inspection usually requires minimal
changes that could entail some costs. For example, facilities may need to
change their product labels or may need to revise their food safety procedures
to include more product sampling. He also stated that some establishments that
have transitioned from state to federal inspection, especially older
establishments, have had to upgrade their facilities to meet requirements.
According to a department official, close to half of Arizona’s state-inspected
noncustom-exempt establishments are at least 15 years old. However, because
Arizona has adopted the federal building requirements—such as keeping
establishments in good repair, using appropriate wall and floor materials to help
ensure a sanitary environment, and providing office space for inspectors—in its
administrative code, state inspectors should already be enforcing these
requirements.
Still, some establishments could incur facility modification costs. Three
establishments auditors spoke with believe the USDA will require costly
modifications before granting federal inspection, and department officials
believe this may be true of older rural facilities. Although it is difficult to know
what modifications the USDA would require, they might not be as extensive as
some believe. For example, the USDA’s last on-site review of Arizona’s meat
and poultry inspection program did not result in any findings related to building
requirements. The review was conducted in July 2009, and the USDA inspected
16 state-inspected meat and poultry plants, including three rural plants and
seven plants that were at least 15 years old. Further, according to the USDA
official, most plants do not find transition costs to be prohibitive. An owner of an
Arizona establishment, an urban processor that recently changed to federal
inspection, also stated that although there were costs to make the transition, he
did not find the costs to be prohibitive.
 Some establishments may pay more overtime fees, but use of overtime not
widespread—The USDA charges slaughter and processing plants for
inspection costs for more than 8 hours per day or more than 40 hours in any
workweek. The hourly overtime rate for the USDA was $58.93 in fiscal year
2008.1 In contrast, Arizona only charges overtime fees to slaughtering plants
(processing plants are exempt) and has a much lower overtime rate—$19.40
per hour as of December 2009. However, using overtime has not been
1 In its Fiscal Year 2011 Budget Summary and Annual Performance Plan, the USDA proposed adding two new meat and
poultry inspection user fees. One proposed user fee would be collected from plants that have sample failures or require
additional inspection activities because of a pattern of regulatory noncompliance. The other proposed user fee would be
for a facility’s application and annual renewal activities in order to cover the increased costs above and beyond basic
inspection services provided to meat and poultry establishments. The USDA estimated collections from the new fees
would total $4 million and $8.6 million nation-wide, respectively. The USDA planned to submit legislative proposals that
would permit the new fees.
Office of the Auditor General
page 23
Arizona has adopted
federal building
requirements for meat
and poultry
establishments.
widespread at state-inspected slaughtering plants. In fiscal years 2008 and
2009, the Department charged only three establishments for overtime. The total
fees for the 2 years were just over $600, representing approximately 36 hours of
overtime at the Department’s rate of $17.05 per hour for those years. Auditors
were unable to estimate the extent to which state-inspected processing plants
work overtime because the Department does not track this information, although
several plants appear to have overtime hours based on a review of plants’
operating schedules. Thus, it is unknown how many Arizona processors would
work overtime under federal inspection and, therefore, have to pay the federal
overtime rate.
 Some establishments are concerned they may not receive the same degree of
individualized service, but the USDA has taken steps to improve its outreach—
Some owners of state-inspected meat and poultry plants who auditors spoke
with said that state meat inspectors might provide owners with more opportunity
to receive individualized attention, education, and assistance to navigate
regulation than federal inspectors do.1 Auditors heard from some state-inspected
establishment owners that state inspectors were responsive to their
needs and who thought that federal inspectors might be less helpful. Two
owners who had experience with both state and federal inspection said that
state inspectors were more helpful with some aspects of regulation, such as
approving new labels. Additionally, one owner of a state-inspected plant
speculated that USDA inspectors might spend more time reviewing paperwork
and be less concerned than state inspectors with ensuring that a wholesome
product is made. However, another owner of a rural plant that has been under
both state and federal inspection told auditors that USDA inspectors are
respectful, knowledgeable about meat and poultry regulations, and provided a
better quality of inspection.
The USDA has heard similar complaints from small and very small
establishments and has taken several steps to improve its outreach to these
establishments. Specifically, in 2008, the USDA started a program whose
primary purpose is to provide small and very small establishments under both
state and federal inspection with assistance in complying with regulations. This
program publishes newsletters, conducts webinars, and provides guidance
documents. Additionally, the USDA has an online question-and-answer
knowledge base called “Ask Karen” that contains information pertinent to the
safe preparation of meat, poultry, and egg products. One USDA-inspected meat
processor in Arizona told auditors that it takes “Ask Karen” about a day to
respond to his questions. Finally, in December 2009, the USDA launched a small
plant help-desk to provide regulatory assistance for operators of small and very
small meat and poultry plants.
1 Throughout the course of the audit, auditors interviewed representatives from ten state-inspected and four federally
inspected slaughter and/or processing establishments. The ten state-inspected establishments included seven urban
and three rural facilities, and included four facilities a department official identified as being over 25 years old. During the
interviews, auditors discussed the state inspection program and the possibility of transferring the program to the USDA
or raising user fees.
State of Arizona
page 24
In 2008, the USDA
started a program to
help small
establishments comply
with regulations.
The Department believes that some state-inspected meat and poultry
establishments, especially those located in rural areas, would have difficulty
transitioning to federal inspection. It is possible that some of Arizona’s state-inspected
plants would not apply for federal inspection and do only custom-exempt
work or close down. When New Mexico transitioned to federal inspection in 2007, 26
of the 31 state-inspected plants applied for and were granted federal inspection,
according to a USDA official.1 Of the plants that received federal inspection, most of
them were in rural areas. New Mexico officials told auditors that the establishments
that did not make the transition did not do so because of financial considerations and
because the owners did not want to work under federal inspection.
The Department’s meat and poultry program budget is limiting the amount of
inspection it can provide and is causing some plants to seek federal inspection.
Specifically, department officials told auditors that, because of budget constraints, as
of October 2009, the Department has had to deny requests from 27 establishments
that had requested state inspection or additional inspection days in the previous 5
years. One establishment owner who had been denied state inspection in the past
told auditors that he was applying for federal inspection at a new rural facility because
he did not think the State could offer him inspection and because he planned to sell
his product in interstate commerce. Additionally, in October 2009, the Department
stopped providing inspection on Saturdays because of budget constraints. As of
September 2009, eight state-inspected processing plants had been scheduled to
receive Saturday inspection. One of these plants has since obtained federal
inspection for Saturdays.
Alternatively, State could increase fees to cover costs
If the Legislature decides to retain the state meat and poultry inspection program, the
meat and poultry industry should pay for the regulatory costs because, without a
state meat and poultry inspection program, the federal government would conduct
the safety inspections at no cost to the State. Having both state and federal meat and
poultry inspection programs in Arizona primarily benefits the industry, and not the
State, by allowing industry members to choose between two regulators. As
discussed in Finding 1 (see pages 7 through 16), the parties that benefit from a
government program should pay the costs. If the state inspection program is
retained, the Department should follow an orderly process, such as the one
suggested in Finding 1, to develop a proposal for fees that would cover the state
inspection program’s costs. This process should include assessing the program’s
efficiency to minimize costs where possible; ensuring it has a way to accurately track
program costs, including testing performed at the State Agricultural Laboratory;
developing an equitable method to determine fees for different types of industry
members based on the work required to regulate each type such as meat and
poultry slaughterers or processers; considering the effect fee increases may have on
1 Of the 26 plants that were granted federal inspection, the USDA official noted that five of them later decided to operate
as custom-exempt.
Office of the Auditor General
page 25
The Department has
had to deny inspection
requests because of
budget constraints.
different establishment types; obtaining stakeholders’ input in proposing new fees;
and, lastly, proposing fee changes for the Legislature to consider. After receiving the
Department’s proposal, the Legislature should consider modifying statute to raise
existing fees or authorize the Department to create additional fees. According to
department officials, industry members are generally not opposed to paying higher
fees as long the monies are used for the program and not transferred to the State
General Fund.
However, because there are only 34 state-inspected establishments (excluding
custom-exempt establishments), licensing fees would need to increase significantly
to cover the meat and poultry inspection program costs. Statute requires meat and
poultry establishments to pay between $5 and $80 in licensing fees, although in fiscal
years 2009 and 2010 fees were between $35 and $150 as authorized by legislation.1
Similarly, the three other western states—Montana, Utah, and Wyoming—that have
state meat and poultry inspection programs also charge relatively low fees. Licensing
fees in these states range from $25 to $150. Based on the program’s fiscal year 2009
State General Fund appropriation, the 34 state-inspected establishments would
potentially need to pay more than $10,000 on average to cover the program’s costs,
which could place a burden on the establishments.2 Because fees would need to
increase significantly to cover costs, the Department might recommend phasing in
the changes. Still, increasing user fees to fully fund the meat and poultry inspection
program may result in some state-inspected establishments changing to federal
inspection to avoid paying higher fees.
The Department’s options for reducing program costs to minimize the impact on the
industry are limited. Specifically, state cooperative meat and poultry program
inspectors must perform inspection activities that are at least equal to those adopted
by the USDA, including providing adequate inspection coverage on days
establishments produce products. Therefore, the State could not reduce the
frequency of its meat and poultry inspections for cost savings without jeopardizing its
“at least equal to” status. States that fail to administer programs at least equal to the
federal program can be designated, meaning the USDA will take over all meat and
poultry inspections.
Recommendations:
2.1. The Legislature should consider eliminating the state meat and poultry
inspection program and transferring inspection responsibilities to the USDA.
2.2. If the Legislature decides to retain the state meat and poultry inspection
program, the Department should propose new fees to the Legislature to fund
1 Laws 2008, Ch. 291, §12, and Laws 2009, 4th S.S., Ch. 3, §23, authorized the Department to increase fees for fiscal years
2009 and 2010. On September 1, 2008, the Department raised its licensing fees for meat and poultry establishments from
between $5 and $80 to between $35 and $150.
2 The exact amount required would depend on how costs were allocated between commercial slaughter, commercial
processing, and custom-exempt establishments, each of which requires a different level of regulation.
State of Arizona
page 26
Fees to cover program
costs could place a
burden on
establishments.
the cost of the program. In developing the fees, the Department should do the
following:
a. Develop equitable fees that address different types of industry members
based on the work required to regulate each member such as meat and
poultry slaughterers and processors;
b. Ensure that it has an adequate process for tracking cost data for the meat
and poultry inspection program, including meat and poultry product testing
at the State Agricultural Lab;
c. Evaluate the state meat and poultry inspection program’s efficiency to
ensure that program costs are not higher than is necessary to complete the
work; and
d. Consider the effect fee increases may have on different establishment
types and obtain their input in proposing new fees. Because proposed fees
would be significantly higher than current fees, the Department might
recommend gradually increasing fees.
2.3. After receiving the Department’s proposal, the Legislature should consider
modifying statute to raise existing fees or authorize the Department to create
additional fees.
Office of the Auditor General
page 27
State of Arizona
page 28
Department helps to ensure egg safety and
quality
The Department of Agriculture’s (Department) egg inspection program appears to
adequately help ensure egg safety and quality in Arizona. Eggs are one of the foods
most commonly linked to foodborne illness in the U.S. The Department’s egg
inspection program, which the industry funds, helps maintain safe and high-quality
eggs by enforcing safety and quality regulations that are in line with model egg
regulations. The U.S. Department of Agriculture (USDA) and the U.S. Food and Drug
Administration (FDA) also regulate egg safety and quality to help reduce foodborne
illness from eggs.
Eggs commonly linked to foodborne illness
Eggs are one of the foods most commonly linked to foodborne illness outbreaks. In
2008, the Center for Science in the Public Interest (Center) reported that, nation-wide,
eggs were linked to 72 outbreaks and 1,747 illnesses between 1990 and 2006, and
egg dishes such as egg salad and French toast were
linked to an additional 279 outbreaks and 9,396
illnesses.1 The Center also reported that the number of
egg-related outbreaks has declined in recent years. The
primary contaminant in egg-related illnesses is
Salmonella Enteritidis (see textbox). According to
experts, the industry and consumers are responsible for
reducing the number of foodborne outbreaks
associated with eggs. Specifically, industry can reduce
the contamination risk by adopting measures to prevent
Salmonella Enteritidis from infecting laying hens during
production and by properly washing, handling, and
refrigerating eggs during processing, transportation,
1 The Center for Science in the Public Interest is a nonprofit organization that works to improve the public’s health
through its work on nutrition and food safety issues. Center for Science in the Public Interest. (2008). Outbreak
alert 2008: Closing the gaps in our federal food-safety net. Retrieved September 21, 2009, from
http://www.cspinet.org/new/pdf/outbreak_alert_2008_report_final.pdf
Office of the Auditor General
page 29
FINDING 3
Salmonella Enteritidis is a bacterium that
can cause illness in humans. Shell eggs are
a primary source of human infections. Shell
eggs can be contaminated through
unsanitary environmental conditions after
being laid or through ovarian tissue in
infected hens before the shell is formed.
Source: Auditor General staff analysis of information
from the USDA, the FDA, the National Egg
Quality School, and the United Nation’s Food
and Agriculture Organization.
and storage. Consumers also can reduce the risk by storing eggs at the proper
temperature and cooking them thoroughly.
Department inspects and grades eggs
The Department maintains an egg inspection program to help ensure the safety and
quality of eggs produced and sold in Arizona. Program staff inspect eggs and egg
products to enforce compliance with state laws and regulations, and perform grading
services on the USDA’s behalf at the State’s only commercial egg producer. The egg
inspection program is funded entirely by industry fees. As of December 2009, the
program had eight inspectors and, as of February 2010, a fiscal year 2010 budget of
$866,700. Although the USDA licenses most of the inspectors to provide the grading
services, three inspectors perform state inspections while five inspectors provide
USDA grading services.1 Specifically:
 State inspection—Program staff inspect eggs and egg products at laying
facilities, wholesalers, and retail stores to ensure compliance with state laws and
regulations that address safety and quality. These laws and regulations are in
line with model egg regulations and include refrigeration, expiration dating,
grading, and sanitation requirements (see textbox).2
1 One state egg inspector is a trainee and is not yet licensed by the USDA.
2 The model egg regulations are written by the National Egg Regulatory Officials, whose membership consists of state
agriculture department officials and whose purpose is to promote uniform standards for quality, safety, labeling, and
handling of shell eggs and egg products that ensure a safe, fresh, and truthfully marketed egg supply.
State of Arizona
page 30
Egg laws and regulations enforced by program inspectors
 Refrigeration—According to food safety experts, proper storage temperatures can inhibit bacterial growth in eggs.
State law requires eggs to be stored at a temperature no higher than 45°F and egg products at a temperature no higher
than 0°F.
 Expiration dating—It is illegal to sell eggs marked grade AA or A past their expiration date in Arizona. According to
food safety experts, consuming eggs soon after they are laid can help reduce opportunities for bacteria to grow in
contaminated eggs. Arizona requires all eggs sold in the State to have an expiration date of 24 days after being
candled, which is one of the shortest expiration periods in the nation.
 Egg quality—The State has adopted federal standards, grades, and weight classes that set quality requirements for
grade AA, A, and B eggs. These quality standards also entail safety aspects, such as ensuring that eggs are clean from
bacteria and do not have excessive cracks that could allow bacteria to enter.
 Sanitation—In 2009, Arizona amended its administrative rules to require all egg producers in the State to meet the
USDA’s facility and sanitary operation requirements. These requirements help ensure eggs are properly washed and
sanitized during egg grading and packing.
Source: Auditor General staff analysis of Arizona Revised Statutes §§3-701, 3-715, and 3-727; Arizona Administrative Code R3-2-901 through
903 and 906 through 908; World Health Organization Food and Agriculture Organization of the United Nations. (2002). Risk
assessments of Salmonella in eggs and broiler chicken: Interpretative summary (Microbiological Risk Assessment Series 1). Rome,
Italy: Author.
Industry fees pay for the
egg inspection program.
The Department licenses companies that sell eggs wholesale in the State and
charges them a $25 annual licensing fee and a quarterly assessment fee based on
the number of eggs or weight of egg products sold to retailers. The Department
issued 82 licenses during fiscal year 2009.
During the inspections, inspectors verify
storage temperatures and check expiration
dates for both eggs and egg products, and
visually examine, or candle, a sample of
eggs to verify the egg grade (see Photo 1).
Statute requires inspectors to retain, or
prohibit from being sold, all eggs and egg
products that do not comply with state
requirements. Although inspection
frequencies are not specified in statute or
rule, the Department has set goals to inspect
large wholesalers (including the State’s only
commercial egg producer) once per month,
small wholesalers once per quarter, and retail
stores from every year to once every 3 years
depending on how many eggs they sell.
According to department data, state
inspectors performed 396 inspections at
wholesalers (about 90 percent of the
Department’s goal for wholesale egg
inspections) and 359 inspections at retail
stores in fiscal year 2009.
 USDA grading services—The USDA maintains a cooperative agreement with
the Department to provide grading services at industry members’ request, who
pay an hourly rate to cover the costs of these services and a volume charge
based on the number of graded cases of eggs. The Department collects the
volume charges from industry members and passes them on to the USDA. In
addition to grading eggs, state inspectors monitor plant sanitation, processing
and storage temperatures, and handling procedures. The Department provides
daily grading services at three egg laying facilities. Only eggs graded under a
USDA grader’s supervision have the USDA grade shield.
Although this audit did not focus on program effectiveness, information obtained
during the audit suggests that state laws department staff enforce adequately
protect the public from unsafe eggs. Specifically, state laws are in line with model
egg regulations and, in the case of expiration dates, exceed other states’ practices.
In addition, according to department data, the Department achieved about 90
percent of its goal for wholesale egg inspections in fiscal year 2009 and retained
eggs that did not meet standards to prevent them from sale to the public.
Office of the Auditor General
page 31
.
Photo 1: Egg Candling
Source: Used with permission of Hickman Family Farms.
Federal regulations also address egg safety
The federal government also plays an egg quality and safety role through regulations
and participation in a federal-state-industry cooperative program. Under the 1970
Egg Products Inspection Act (Act), the USDA provides continuous inspection of egg
products, such as liquid or frozen eggs. Similarly to regulating meat slaughtering
establishments, the Act requires mandatory continuous inspection by USDA
inspectors throughout the production of egg products. The Act also helps ensure
safety by requiring these products to be pasteurized. Arizona has one USDA-inspected
egg products plant. In addition, the USDA administers the National Poultry
Improvement Plan, a cooperative federal-state-industry program that establishes
standards to evaluate poultry breeding stock and hatchery products to limit egg-transmitted
and hatchery-disseminated diseases such as Salmonella Enteritidis. The
Department and the State’s only commercial egg producer both participate in this
program.
The FDA is also responsible for egg safety and is working to solve the problem of
Salmonella Enteritidis in eggs. In 2009, the FDA issued a rule that requires egg
producers to implement measures to prevent contamination and potential illness
from Salmonella Enteritidis. Specifically, beginning July 9, 2010, egg producers will be
required to have and implement a prevention plan that addresses farm and
henhouse security, rodent control, and Salmonella Enteritidis testing. This rule allows
for state and/or local officials to help implement it by carrying out inspections and
using prescribed administrative remedies, and the FDA plans to provide further
guidance to states and localities on enforcing this rule. According to a company
official from Arizona’s only commercial egg producer, he does not anticipate that his
company will have to change many of its practices to come into compliance with the
new rule.
This finding contains no recommendations.
State of Arizona
page 32
Department can further promote produce safety
Although government and the agriculture industry have increased efforts to
encourage produce safety, the Department of Agriculture (Department) can further
promote produce safety in Arizona. Produce safety concerns have heightened in the
U.S. as significant human illness outbreaks have affected thousands of people. The
industry and government have taken steps to address the issue of produce safety by
encouraging food safety audits, and providing guidelines for safe growing and
handling practices, but participation is voluntary, and neither the State nor the federal
government have regulatory requirements for food safety that producers,
processors, and shippers must follow. The Department’s emphasis has traditionally
been on quality standards (such as size, color, and shape) rather than produce
safety. Although the Department has shifted some of its focus toward produce safety,
auditors identified an additional step the Department could take. Specifically, it could
target some of its existing agricultural federal grant dollars to help companies
prepare for and receive food safety audits.
Produce safety is a national concern
An increase in the number of foodborne illness outbreaks associated with fresh fruits
and vegetables has raised national concern for produce safety in recent years. For
example, since 2006 there have been large national outbreaks tied to spinach,
peppers, and peanuts (see textbox, page 34). The 2008 outbreak of Salmonella in
peppers was one of the largest foodborne illness outbreaks reported in the last 10
years, affecting over 1,400 people in 43 states, the District of Columbia, and Canada.
Produce is particularly susceptible to contamination because it is grown in a natural
environment. Further, risk of illness from produce consumption may be higher
because produce is often consumed raw, unlike animal products, which are
generally cooked or pasteurized to kill bacteria. According to the Center for Science
in the Public Interest, produce was linked to 35,060 foodborne illnesses between
1990 and 2006, which is 21 percent of illnesses linked to a specific food source
during that time.1
1 Center for Science in the Public Interest. (2008). Outbreak alert 2008: Closing the gaps in our federal food-safety net.
Retrieved September 21, 2009, from http://www.cspinet.org/new/pdf/outbreak_alert_2008_report_final.pdf
Office of the Auditor General
page 33
FINDING 4
Produce is susceptible
to contamination
because it is grown in a
natural environment.
Further, the U.S. Centers for Disease Control and Prevention (CDC) reported that the
most common foods linked to foodborne illness outbreaks reported during 2006,
after poultry, were leafy vegetables and fruits/nuts.1
Although the federal government does not require produce growers to implement
preventative food safety measures, federal agencies have taken steps to address
produce safety concerns. For example:
 U.S. Food and Drug Administration (FDA)—The FDA has issued guidance for
safely growing and handling produce to reduce microbial contamination. In
1998, it published its Guide to Minimize Microbial Food Safety Hazards for Fresh
Fruits and Vegetables, and in 2009, it issued commodity-specific draft food
safety guidance for tomatoes, melons, and leafy green products, the three types
of produce more often associated with foodborne illness. The guidance
suggests minimizing potential microbial contamination in various ways such as
ensuring that the quality of water used for produce’s final rinse is consistent with
EPA requirements for drinking water and minimizing opportunities for field
contamination by providing accessible toilets and hand-washing facilities for
workers. However, the FDA typically does not inspect farms and does not
enforce compliance with recommended practices in these guidance
documents.
 U.S. Department of Agriculture (USDA)—In 1999, the USDA’s Agricultural
Marketing Service introduced a program for voluntary produce safety audits
known as the Good Agricultural Practices and Good Handling Practices
(GAP/GHP) Audit Verification Program. These audits verify adherence to the
recommendations made in the FDA’s Guide to Minimize Microbial Food Safety
1 Surveillance for foodborne disease outbreaks—United States, 2006. (2009, June 12). Morbidity and Mortality Weekly Report, 58(22), 609-
636. Retrieved September 30, 2009, from http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5822a1.htm
State of Arizona
page 34
Major foodborne illness outbreaks from produce
Spinach—In 2006, 205 illnesses and 3 deaths were associated with
fresh bagged spinach from California that was contaminated with E.
coli O157:H7.
Jalapeno and serrano peppers—In 2008, over 1,400 illnesses from
Salmonella-contaminated peppers produced in Mexico were reported
in what was first thought to be a tomato-related outbreak.
Peanuts—In 2008 and 2009, Salmonella-contaminated peanuts from
Georgia caused over 500 illnesses and may have contributed to as
many as 9 deaths.
Source: Auditor General staff summary of information from the CDC, the FDA, and
Trust for America’s Health.
The FDA has issued
commodity-specific
guidance for tomatoes,
melons, and leafy
greens.
Hazards for Fresh Fruits and Vegetables. The GAP section of the audit examines
farm practices such as examining the farm sewage system for leaks to prevent
produce contamination. The GHP section examines handling practices at
packing facilities, storage facilities, and wholesale distribution centers. For
example, an operation should prohibit workers with infectious diseases from
handling fresh produce. The USDA licenses state inspectors to conduct the
audits, which are valid for 1 year. The companies that request the audits pay a
federally established rate of $92 per hour, including inspectors’ travel time, for
both the initial audit and any follow-up visits. According to a department
inspector who conducts these audits, the audits usually last between 2 and 7
hours, with between 1 and 9 hours of travel time.
In the absence of federal regulations, the food and agriculture industry has also taken
steps to ensure produce safety. For example:
 Third-party audits—Many retailers require produce suppliers to follow specific
quality and safety standards and to undergo third-party audits to ensure
compliance. These standards are often different, and suppliers who sell to
multiple retailers may need to undergo multiple audits under different standards.
For example, some standards require fields to be set a certain distance from
concentrated animal feeding operations, a potential source of contamination,
while others do not. In addition, although these audits help ensure safe
practices, they are required only by the industry and are not monitored or
required by government.
In addition, industry members and state agencies have worked together to help
ensure produce safety. For example:
 Statutes and marketing agreements—Members of the agriculture industry in
some states, including Arizona, have worked with their respective states to pass
statutes or develop marketing agreements for specific commodities. For
example, in Florida, the tomato industry worked with the State to develop a
mandatory tomato safety program. Florida statute requires the Florida
Department of Agriculture and Consumer Services to conduct tomato safety
inspections at farms, greenhouses, and packing houses to ensure compliance
with safety practices in Florida’s tomato best practices manual. Industry fees
pay for the inspection costs as well as research grants to provide scientific
information on tomatoes. In California and Arizona, the leafy greens industry has
worked with state agencies to implement marketing agreements for leafy green
products. Although participation in these agreements is voluntary, those who
agree to participate must follow specific safety standards and undergo annual
audits to ensure compliance (see textbox, page 36). As of November 2009, 35
Arizona companies have signed the agreement, representing 96 percent of leafy
greens grown in Arizona according to the marketing agreement Web site. The
USDA is considering an industry proposal to create a national leafy greens
Office of the Auditor General
page 35
GAP/GHP audits
examine farm and
handling practices for
preventing produce
contamination.
marketing agreement and held hearings for public comment in September and
October 2009. The USDA accepted comment until January 27, 2010.
Despite these efforts, some industry members have called for federal produce safety
regulations to create uniform national standards. Some industry representatives have
published documents and presented testimonials to the USDA and FDA concerning
the need for national produce standards. The Food Safety Enhancement Act of 2009
(Act) was introduced in Congress and, if it passes, will require the FDA to establish
science-based food safety standards for growing, harvesting, packing, sorting,
transporting, and holding fruits and vegetables that the FDA determines are
necessary to reduce health risks. The Act would require the FDA to update its
guidance for minimizing microbial food safety hazards for fresh fruits and vegetables.
As of January 6, 2010, the bill was with the U.S. Senate. In addition, in 2009, the FDA
reported that within the next 2 years it expects to finalize its commodity-specific food
safety guidance for tomatoes, melons, and leafy greens and require compliance with
them.
Department can do more to promote produce safety
The Department has shifted some of its focus from produce quality to produce safety
but can take an additional step to promote produce safety audits. In 2009, the
State of Arizona
page 36
Arizona Leafy Green Products Shipper Marketing Agreement
In September 2007, the Department and the State’s leafy green products industry created the Arizona Leafy Green
Products Shipper Marketing Agreement. Arizona’s agreement was patterned after a similar agreement in California
following the 2006 E. coli outbreak in bagged spinach from California. Participation in the agreement is voluntary.
However, shippers who agree to participate and their suppliers must follow mandatory safety standards for growing
and handling leafy green products and are subject to annual audits that check compliance with the standards. The
standards cover worker hygiene, water quality, field use, and animal control. For example:
 Untreated manure must be kept at a specific distance from water wells;
 Land adjacent to fields must be free from septic leaks or other risks; and
 There must be no evidence of animal fecal material in the fields.
The agreement is funded by an assessment on products shipped by members and is run by a committee of industry
members. This committee contracts with California’s Department of Food and Agriculture, the agency that conducts
the audits for California’s agreement, to perform the Arizona audits. The committee also contracts with the Arizona
Department of Agriculture to provide administrative and legal services such as collecting the assessment on
products shipped by members and coordinating public outreach sessions. As of November 2009, 35 companies
had signed the Arizona agreement. Collectively, these companies ship and sell more than 85 percent of leafy green
products nationally and in Canada from November through March.
Department began retraining its produce quality inspectors to perform produce
safety audits and has begun providing industry with information about the
GAP/GHP audit program. In addition to these efforts, the Department should initiate
projects or encourage applicants for federal grant monies the Department awards
to submit proposals for projects that help small companies overcome obstacles to
receiving food safety audits.
Arizona produces significant amounts of fruits and vegetables—
Arizona grows a significant amount of produce, especially leafy greens. In 2008,
Arizona ranked third in the nation for the production of fresh market vegetables
and melons, producing 7.4 percent of the nation’s total production, compared to
9.5 percent by Florida and 49.1 percent by California (see Figure 3). In addition,
Arizona is the second largest producer of lettuce in the nation, producing about
22 percent of the national total, compared to California, which produces the other
78 percent.
Office of the Auditor General
page 37
California 49.1%
Florida 9.5%
Arizona 7.4%
Georgia 4.9%
New York 3.6%
Other states
25.5%
Figure 3: Percentage of U.S. Fresh Market Vegetable and Melon
Production by State for 24 Selected Crops1
Calendar Year 2008 Estimates
1 The 24 selected crops are artichokes, asparagus, snap beans, broccoli, cabbage, cantaloupes, carrots,
cauliflower, celery, sweet corn, cucumbers, garlic, honeydews, lettuce (head, leaf, and romaine), onions, bell
peppers, chili peppers, pumpkins, spinach, squash, tomatoes, and watermelons. The three largest crops, in
terms of production, are onions, head lettuce, and watermelons, which combined account for 37 percent of the
total production.
Source: Auditor General staff analysis of USDA data on fresh market vegetable and melon production.
United States Department of Agriculture, National Agricultural Statistics Service. (2009). Vegetables 2008 summary.
Retrieved October 21, 2009, from http://usda.mannlib.cornell.edu/usda/current/VegeSumm/VegeSumm-01-28-
2009.pdf
Department has shifted some focus to produce safety—Given the
importance of produce to the State’s agriculture industry, the Department has
taken some steps to shift its focus from produce quality to produce safety. Since
1929, the Department has enforced state product quality standards for each
commodity grown or marketed in Arizona through its Citrus, Fruit and Vegetable
Standardization Program. The program also manages the federal-state inspection
program that provides federal inspection services, such as the GAP/GHP audits,
and enforces U.S. import requirements at the international border between Arizona
and Mexico. Historically, the standardization program has licensed produce
packers, dealers, and shippers and has inspected produce to verify quality
standards such as color, shape, decay, size, maturity, and labeling. Although
quality standards are important, industry members and department officials have
said that the program has become somewhat obsolete as the industry’s quality
standards for some commodities now exceed state standards. Consequently,
Arizona’s produce industry has worked with the Department to shift its focus from
quality to promoting food safety standards. Specifically:
 Discontinuing quality inspections—The Citrus, Fruit and Vegetable Advisory
Council voted to discontinue standardization program inspections to enforce
state quality standards beginning in August 2009. The program will continue
to license packers, dealers, and shippers and enforce labeling requirements.
 Training food safety auditors—Using monies from produce industry
assessments, the Department has begun training more of its federal-state
inspectors and all of the former standardization inspectors to perform the food
safety focused audits such as GAP/GHP audits as well as audits for the
Arizona leafy greens marketing agreement. According to the Department, in
2009, only two of the Department’s federal-state inspectors were certified by
the USDA to perform GAP/GHP audits. However, with the shift from
standardization to safety, an additional nine inspectors are in the process of
becoming certified by the USDA to perform GAP/GHP audits, and four
inspectors are being trained to perform the leafy greens audits. The industry
pays for both GAP/GHP and leafy greens audits.
 Promoting GAP/GHP audits—In conjunction with training additional
inspectors to perform GAP/GHP audits, the Department has begun promoting
these audits among packers, dealers, and shippers licensed by the
Department. According to the Department, the GAP/GHP inspectors have
been distributing flyers to inform licensees about the availability and benefits
of safety-related activities such as GAP/GHP certification. Even so, as of
November 2009, only 11 Arizona companies received and passed GAP/GHP
audits. By comparison, the USDA’s National Agricultural Statistics Service
estimates that there are 241 commercial vegetable and melon farms in
Arizona, and there were 525 licensed produce dealers, packers, and shippers
in the State in fiscal year 2009.
State of Arizona
page 38
Additional department
inspectors are
becoming certified to
perform GAP/GHP
audits.
Department could further promote produce safety audits—In addition
to the steps the Department has already taken related to produce safety, the
Department could use some of its federal grant monies such as the Specialty Crop
Block Grant to assist companies that may need assistance preparing for
GAP/GHP audits. Since 2008, the USDA’s Agricultural Marketing Service has
offered all 50 states grant monies for enhancing the competitiveness of specialty
crops, including fruits, vegetables, tree nuts, and other nongrain crops. Grant
monies can be used for projects such as specialty crop research, increasing
nutrition knowledge about specialty crops, assisting entities in developing Good
Agricultural Practices, and in cost-sharing arrangements for safety audits. In fiscal
year 2009, the Department received over $1.1 million of this Specialty Crop Block
Grant money, which it awarded to 18 agricultural research projects designed to
enhance the competitiveness of Arizona specialty crops.
Although the Department awards Specialty Crop Block Grant monies to projects
based on priorities that include food safety, few funded projects are focused
directly on produce safety. The Department receives applications for these monies
from universities, industry associations, and other entities. It makes awards based
on eight priorities suggested by stakeholders, including food safety, research,
education, and public outreach. The Department awarded monies to 18 projects
in fiscal year 2009. However, according to a department official, few applications
have been received that focus directly on produce safety. For example, in fiscal
year 2009, only 3 of the 38 applications the Department received focused directly
on food safety, and none of these 3 focused on food safety audits. Of the 3 food
safety-focused applications, the Department funded one project that involved
educating youth in Yuma County—where a high volume of leafy greens are
produced—about the importance of food safety and their role in keeping food safe
by staying out of fields and off of canal banks. The other two were disqualified, one
because it did not meet application requirements and the other because of
duplicate funding. The Department also funded seven additional projects that
focused on pesticide or fertilizer use, which could also affect food safety by helping
to reduce chemical residue on foods.
The Department could take a more proactive approach by initiating produce safety
projects or encouraging applicants to submit proposals focused on projects that
help companies overcome obstacles to food safety audits. Department officials
agreed that targeting monies toward produce safety audits could benefit specialty
crops in Arizona. These types of projects are considered eligible projects by the
grant specifications and have also been performed in some other states. For
example:
 Consultation—Grant monies could be used for projects that provide
consultation or training that prepares growers and handlers for produce safety
audits. Small companies that cannot afford to hire an in-house produce safety
Office of the Auditor General
page 39
The Department could
use federal grant
monies to encourage
food safety audits.
manager may have difficulty meeting audit requirements such as having
standard operating procedures that describes how the company will help
keep food safe. Some states have used federal grant monies to provide audit
preparation assistance to these companies. For example, in fiscal year 2009,
the Texas Department of Agriculture used Specialty Crop Block Grant monies
to fund a vegetable specialist at Texas A&M University to provide free
GAP/GHP consultation to help Texas farms and greenhouses develop
standard operating procedures. In addition, the New Jersey Department of
Agriculture provides monies from other grants to a similar program at Rutgers
University, which offers safety audit assistance including training, standard
operating procedure development, and mock audits.
 Cost share—Grant monies could be used in a cost-share program to promote
produce safety audits as well. Because the cost of third-party safety audits
can be prohibitive, especially to small farmers, some states’ departments of
agriculture have started cost-share programs to help growers and handlers in
their state receive GAP/GHP audits. For example, the Pennsylvania
Department of Agriculture’s cost-share program awards Pennsylvania
growers and handlers who pass a GAP/GHP audit with $400 of Specialty Crop
Block Grant monies to help offset the audit’s costs. In addition, Connecticut
used grant monies to implement a program to reimburse 50 percent of audit
costs up to $500 to become USDA GAP certified. Also, the Maryland
Department of Agriculture used grant monies in a GAP/GHP audit cost-share
program and, according to a Maryland department official, has reimbursed
ten applicants $400 each. Further, according to the Texas Department of
Agriculture, it approved one Specialty Crop Block Grant project in 2009 that
offers a one-time, $750 cost-share award to companies that pass a third-party
food safety audit, which could include GAP/GHP audits.
The Department should consider initiating projects or encouraging grant applicants
to submit applications for projects that are focused on food safety audits. However,
in providing these monies for projects of any type, including food safety, the
Department should do so on the basis of the relative costs and benefits involved.
Recommendation:
4.1. The Department should consider initiating projects using available grant monies
or encouraging applicants for grant monies to submit proposals focused on
produce safety such as audit preparation or cost-share projects. The
Department should do this on the basis of relative costs and benefits involved.
State of Arizona
page 40
Department should better promote preventative
food defense measures
The Department of Agriculture (Department) should do more to promote preventative
security measures at facilities it regulates. Since the September 11, 2001, terrorist
attacks (9/11), a heightened concern exists that a terrorist could intentionally
contaminate the United States food supply as a way to threaten public health or hurt
the agricultural economy. Two of Arizona’s most valuable agricultural commodities,
milk and leafy greens, are among the foods most vulnerable to intentional
contamination. Government oversight of security, however, is limited largely to issuing
guidelines and noting areas needing improvement in some inspections where food
defense issues may overlap with food safety issues. The extent to which
establishments have adopted these guidelines varies, and larger establishments
have apparently taken more aggressive actions than smaller establishments. Steps
the Department could take to promote security measures include providing facilities
that it regulates with a voluntary self-assessment tool, increasing food defense
awareness during inspections, promoting more food defense reviews as part of
voluntary audits, and fostering greater collaboration between the many agencies
involved in food safety and food defense.
Intentional contamination of food is a risk
Following 9/11, government officials and the public have expressed concern that the
U.S. food supply could be vulnerable to acts of intentional contamination. Although
the threat of intentional contamination is difficult to measure, food experts believe
vulnerabilities should be assessed because the potential consequences could be far
reaching. Arizona is a significant producer of some foods considered to be more
vulnerable, such as milk and leafy green vegetables.
Food defense is a national concern—Food defense refers to protecting food
products from intentional contamination. In October 2001, following 9/11, the
Office of the Auditor General
page 41
FINDING 5
The threat of intentional
contamination is hard to
measure, but
consequences could be
far reaching.
President added the agriculture and food industries to the list of critical
infrastructure systems needing protection from potential terrorist attacks.
According to the U.S. Department of Homeland Security, experts reason that,
given the vulnerability of food to major unintentional foodborne illness outbreaks,
individuals with malevolent aims could intentionally reproduce these outbreaks
with more severe consequences than unintentional ones.1 A 2005 study funded by
the National Center for Food Protection and Defense estimated that many U.S.
residents expected at least one terrorist attack involving deliberate chemical or
biological contamination of a common food product to occur in their lifetime.2
The threat of intentional contamination is difficult to measure, but experts believe
an incident is plausible and could be far reaching. Thus far, reported cases of
intentional contamination have been sporadic. In addition,
most reported cases have not occurred in agricultural
settings, but rather in retail outlets, homes, and workplaces,
and were typically performed using commonly available
household, agricultural, or industrial chemicals (see textbox).
However, experts believe the threat is plausible and that
vulnerabilities at any point in the food supply chain should be
considered, given the potential impact. For example,
terrorists or other individuals could introduce animal or plant
diseases to cause economic harm or generate fear. Persons
wishing to harm public health could use biological,
radiological, or chemical agents to contaminate food
products. The potential costs of intentional contamination
could include loss of life, destruction of crops and livestock,
healthcare expenses, lost wages, and less consumer
confidence in the safety of the food supply.
Arizona produces vulnerable products—Some food products, including
some types that Arizona produces, are more vulnerable than others to intentional
contamination. The FDA states that foods prepared in large batches, foods with a
short shelf life, foods that are easily accessed, and foods that are uniformly mixed
are more at risk for intentional contamination because they can affect a higher
number of people and are difficult to trace back.3 Specifically, the FDA considers
raw milk and fresh leaf and stem vegetables to be especially vulnerable to
intentional contamination. According to a food defense expert, Arizona may be
vulnerable to an intentional act of contamination because it produces a lot of dairy
products and fresh produce. Dairy products and lettuce are among the State’s
most valuable agricultural commodities. In 2008, Arizona ranked 12th in U.S.
1 United States Department of Homeland Security, Office of Inspector General. (2007). The Department of Homeland
Security’s role in food defense and critical infrastructure protection (OIG-07-33). Washington, D.C.: Author.
2 The National Center of Food Protection and Defense was launched as a United States Homeland Security Center of
Excellence in July 2004. It is a multidisciplinary and action-oriented research consortium that addresses the vulnerability
of the nation’s food system to attack through intentional contamination with biological and chemical agents.
3 Acheson, D.A. (2005, November). Equipping and educating the next generation of leaders in food protection and
defense. In Proceedings of the Institute of Food Technologists’ First Annual Food Protection & Defense Research
Conference, Atlanta, GA. Retrieved July 1, 2009, from https://www.ift.org/fooddefense/15-Acheson.pdf
State of Arizona
page 42
Examples of intentional contamination
 In 1984, members of a religious cult poisoned ten
Oregon salad bars with Salmonella, resulting in 751
individual cases of illness.
 In 1996, a disgruntled employee of a Texas hospital
willfully tainted snacks in a staff break room, which
caused illness in 12 people.
 In 2003, a Michigan supermarket employee infected 200
pounds of ground beef with an insecticide, causing
illness in 92 people.
Source: United States Department of Homeland Security, Office of
Inspector General. (2007). The Department of Homeland
Security’s ro